"The
burden of proof is on the central bank to
convince that a connection exists between
accommodative monetary policy and expansion
in the labor market. So far, they have not
demonstrated that link." ~ Stephen Roach (Yale University
Economics professor, back from his exile
in Asia for speaking
truths, probably banished from Wall Street)

"The
system will be totally decentralized as
it goes from hierarchical structures to
relational structures. People who do not
comprehend the shift will end up as scrap
on the bone yard of society. Banks as we
know them will be eventually been wiped
out by massive independent collaboration.
The reintroduction of a global barter system
that applies 21st century technology will
be the final nail in today's system. The
USDollar is being prepared for its coffin." ~ The Voice (an excellent gold market source)

"In
the 21st century Americans have experienced
an extraordinary collapse in the rule of
law and in their constitutional protections.
Today American citizens, once a free people
protected by law, can be assassinated and
detained in prison indefinitely without
any evidence being presented to a court
of their guilt, and they can be sentenced
to prison on the basis of secret testimony
by anonymous witnesses not subject to cross
examination. The US [so-called] justice
system has been transformed by the Bush/Obama
regime into the justice system of Gestapo
Germany
and Stalinist Russia.
There is no difference." ~ Paul Craig Roberts (from recent essay entitled "In Amerika Law No
Longer Exists: the Extermination of Truth")

"The
CIA owns everyone of any significance in
the major media." ~ William Colby (former CIA Director)

"This
year will go down in history. For the first
time, a civilized nation has full gun registration.
Our streets will be safer, our police more
efficient, and the world will follow our
lead into the future!" ~ Adolph Hitler, 1935 (The Weapons Act of Nazi Germany)

CORRECTION: Phnom Penh, mentioned in the pan-Asian conference
last month, is located in Cambodia, not in Vietnam. It was mentioned so often during the
Vietnam War to the young Jackass, that an
incorrect association was formed.

## VATICAN EVENING VESPERS

◄$$$ A GERMAN LAWYER IS TO HEAD THE VATICAN BANK. THIS IS THE BIG HEADLINE
BEHIND THE PUBLICIZED STORY ON THE POPE'S
RESIGNATION. SPECULATION ASIDE, THE CONFESSION
OF MONETARY SINS COMES NEXT. $$$

The story of the first pope to resign in 600 years is captivating, and has generated
heaps of speculation. All precedent since
the 16th century has held that aging and
infirmed popes die within the arms of the
church. Not here! Benedict's resignation
distracts from the bigger headline issue.
A German lawyer is about to head the Vatican
Bank, an institution replete with controversy.
Its shady activity is blamed by some informed
parties as the reason for the pontiff's
premature departure. Truckloads of holy
water will be required to wash the stain
of past monetary sins. The door is open
for the wrath of God to be let loose.

The Vatican appointed German lawyer Ernst von Freyberg
to be the new president of its bank, filling
a post left vacant since May when when a
financial scandal involving narcotics money
laundering with Roman banks tainted the
institution for the umpteenth time. The
appointment was made by a commission of
Cardinals and approved by Pope Benedict
before his departure was announced. The
bank's formal name is a total joke, the
Institute for Works of Religion (IOR). It
has been dogged by scandals for decades,
since its only auditor is God himself, who
has not yet chosen to file formal charges
with Ecumenical regulators. It should be
noted that von Freyberg is not ex-Goldman.
The strong rumors are that the past deals
with JPMorgan, which ran gold leases and
managed central banks loans, will be publicized
and investigated and scrutinized. See
the Zero Hedge article (CLICK HERE).

Numerous Rome reporters have been found murdered over the
years, after pursuing Vatican financial dealings that run renegade to spiritual pursuits.
The word passed on is that the Vatican has been active for years in making its
gold available to central banks for leasing
and other short-term inter-bank loans. Also,
very large cash loans in the form of bearer
bonds were frequent events, like the ones
captured with Japanese national mules at
the Swiss border in 2009. The bonds cover
both gold loans and narcotics deals, as
well as other diabolical dealings. In return,
the Vatican bankers have requested certain
murders be conducted by the US
and UK
intelligence agencies, who are eager to
aid in the missionary efforts. It is highly
doubtful that narcotics money laundering
or gold market rigging or cover-up hit squads
are part of God's will.

The Jackass has one source (met face to face), a man who left his two-year internship
in 1998 at the Vatican after he penetrated
two layers of security at their infamous
secretive communication center. It connects
the satanic covens of the world, and has
five rings of security. The intern resigned
after bothered by chronic sleep disorder
and nightmares, with the many stories of
sexual rituals a constant mist in the air
in cafeterias and libraries. The Vatican
banker sexual rituals with children will
not be mentioned further. As footnote, let
it be known that the Jackass was sexually
molested between the ages of 12 and 14 years
by teachers in high school, all from Franciscan
order. Departing the Catholic Church was
an easy decision, when in college. Conclude
that the Vatican has changed from its
original divine charter set by Simon Peter.

As a young catholic, the Jackass openly questioned the priests, nuns, and brothers
of the order how a human being could be
so arrogant as to speak ex-cathedra and
claim infallibility. Speaking for God and
being within fault appear on face to be
horrendous violations of arrogance and insolence,
an insult to the deity. The clergy never
responded satisfactorally to the young Jackass,
who quit at age 18 years from any formal
association with the Roman Catholic Church,
but remains a fervent Christian. A German
banker contact, whose opinion was solicited,
made a quick comment. He wrote, "It
appears time to bring the knights in and
clean up all the garbage that has piled
up inside the Vatican Bank. If the Pope
disclosed what he knows, many powerful people
would go down long before he would. The
man is very experienced and not a fool.
By staying inside the Vatican
sanctuary, he remains the Chairman Pope
in spite of his official successor to become
the CEO Pope. Clever move indeed. Benedict
is not a politician. He despises the Vatican power jockeys, and he is far from being done dealing with sordid
individuals, all of them Italians. Not one
of the cardinals he appointed has been an
Italian. There is a lot more going on than
meets the eye." It would be so
sweet if the Vatican broke the gold cartel, with some divine
help.

◄$$$ THE VATICAN HAS A LONG HISTORY
WITH GOLD. A MILLENIUM OF RULE DURING THE
EUROPEAN DARK AGES LEFT THE ORGANIZATION
RICH WITH GOLD. THE CRUSADES ADDED TO THEIR
BOOTY. THEIR RELATIONSHIP WITH JPMORGAN
MIGHT SEE SCRUTINY AS IT COMES TO THE SURFACE,
WITH LIGHT SHED. JACKASS CURIOSITY WONDERS
IF POPE BENEDICT, BEING GERMAN, IS AWARE
OF EASTERN ALLIANCE
PLANS COMING TO FORE THAT FOCUS ON GOLD
AND TRADE. $$$

An unholy schism cometh, which will push aside the USDollar,
in a final definitive divergence and division
between paper gold and gold metal. Friend and colleague Rob Kirby offered some information. He pointed to a website
concerning Vatican Bank Claims (SEE LINK)
in which five hot links are included. There
used to be six, the removed link pertaining
to correspondence between the New York Fed
and the Vatican Bank, which referenced gold
accounts at Chase Manhattan Bank in New York. Kirby can attest that specific legal documents used to
be available at this site referencing historical
business relationship with Chase and gold
dealings with the Vatican Bank. Historically
their relationship was almost exclusively
gold based, with bullion bars moving in
brisk volume. Actually, on an historical
basis, Chase provided bullion bank services
for the Vatican.
Think Rockefeller (roots to Chase), not
the House of Morgan.

◄$$$ THE VATICAN HAS A LONG HISTORY
OF NEFARIOUS DEEDS. $$$

The Voice could not restrain himself to join the interchange of historical accounts.
He wrote the following, provided almost
verbatim but edited to flow well. All is
very convoluted with so many cooks and crooks
in the kitchen. The origins go back to post-WWII
when the US
intelligence agency financed the Italian
parties to keep communism in check. It is
the infamous Operation Gladio. The Vatican
played a major role in the activity, since
largely based in Rome (see Red Brigade). The Holy See never could shake the old connections.
The man who played a very big role in all
this was Vince Cannistraro. A mutual acquaintance
who knew Vince for decades held him in very
high regard. He was a top professional.
They killed his entire family (wife and
children) in Lebanon
when he was stationed there. It was said
that Vince did not take shxx from anybody,
not even the president, when he was still
on active duty. He truly wore a white hat
amongst all the black hats.

Lightning Hits Basilica

One should keep firm in knowledge that the Vatican
has been a major house of financial and
violent crime for decades, many centuries.
Just a couple days after Pope Benedict announced
his almost unprecedented resignation, lightning
struck St Peter Basilica in Rome, pictured above. We are told this is a common
occurrence. Doubt that, period. When the
bigger picture emerges, many missing pieces
will come into view. The pope is a very
smart man. He did the unthinkable and took
the world by surprise, including some long-time
scummy financial partners. He did not cave
to pressure, but added to the intrigue.
Some say he set a fatal trap for the the
dark forces. He could have delivered a mortal
blow to nasty insiders at the Vatican, who might find themselves falling onto
their own swords.

##
INTRO MONETARY FRAGMENTS

◄$$$ DAMAGING PRECEDENT COULD FORCE MAJOR LOSSES FOR BANK OF AMERICA
IN MORTGAGE LIABILITY CASES. A RECENT COURT
RULING WAS FOUND IN FAVOR OF THE MONOLINE
INSURER, AGAINST THE BANK ISSUING MORTGAGE
BONDS. $$$

The case is not reported much, but its precedent could be crippling. A judge
has ruled that a large mortgage lender Flagstar
is liable for damages to a monoline insurance
company. Similar issues are at stake
in several cases that Bank of America faces
in court. Flagstar was a big mortgage lender,
now dead. It lent risky mortgages, dubbed
liar's loans where the borrower declared
income that was never checked by the underwriters
to the loans. These are pervasively fraudulent
loans which have caused legal nightmares
for the big banks, and direct liability.
Flagstar was sued by a monoline insurer
named Assured, which engages in specialized
insurance in guaranteeing the quality of
these loans, once packaged into a securitized
bond. The exact same exposure exists in
bigger cases for Bank of America. The big
deal is that the monoline firm Assured
recently won a huge case against Flagstar.
The judge ruled that the lender lied repeatedly
to the firm that insured the quality of
their loans. Under that same methodology,
Bank of America could actually face tens
of $billions in liability from other parties.
The massive exposure to Bank of America
will not end from the mortgage fraud and
basic misrepresentation of mortgage bonds.
In essence, the insurance companies have
demanded the return of their money from
the fraudulent banks who lied about the
asset quality being insured.

The judge found that 75% of the time in year 2005, the lender misrepresented
to the insurance company on loan details.
In 2006, they lied 65% of the time to the
insurer. A massive business was built on
fraud, which victimized even Fannie Mae.
The bond investors all bought a raft of
toxic bonds that went into sudden decline
almost right out of the gate. Not only did
the home loan borrowers lie to obtain the
loans, the banks lied to investors who bought
the big packages in bond securities. The
entire industry lied to everybody, but the
source on bond creation is banks. The
banks grew enormously by doing incredible
volume of crappy loans at a premium yield
with extreme leverage, earning $billions,
against which they posted almost no reserves
against losses. All are liars in the
US mortgage game that went
foul. See the Real News article (CLICK HERE)
with the interview of William Black, professor
of Economics and Law at the University of Missouri in Kansas
City. He is an expert on white collar crime
and the law, a former financial regulator,
and author. He wrote a book with an incredibly
clever title that indicates the depth of
corruption in the US financial system. It is entitled "The
Best Way to Rob a Bank Is to Own One."

◄$$$ BERNANKE'S MENTOR AND DOCTORAL THESIS ADVISER HAS RESIGNED. THE EVENT
MIGHT HAVE SOME MINOR SIGNIFICANCE, BUT
MORE SO ON SYMBOLISM. FISCHER WAS A CHAMPION
OF JUSTIFYING THE PRUDENCE OF FAILED MONETARY
SYSTEMS AND GREAT ENABLER OF WESTERN THEFT
OF WEALTH. $$$

Stanley Fischer has been the head of the central bank of Israel
since 2005. He is often given credit for
steering the small nation through difficult
times. He has announced his resignation,
effective in June, two years before his
term ends. At age 69 years, he is hardly
beyond his useful years, nor in poor health.
Fischer is known as the PhD thesis advisor
for current USFed chairman Ben Bernanke
at the Massachusetts Institute of Technology
(MIT) in the 1970s. They created a revisionist
history thesis pertaining to the Great Depression,
complete with unjustifiable untestable constructs.
The highly praised thesis is seen as basis
for Quantitative Easing and massive bond
purchases to safe the system. However, since
the nation is not subject to the Gold Standard,
no solution has come. The Bernanke PhD thesis
is being disproved with each passing month,
and each new QE program. Fischer has held
many top posts, all integral to the failed
fiat paper financial structure that is crumbling
on a global scale never witnessed in history.
He served as deputy director of the Intl
Monetary Fund, and held a top post at Citigroup
Corp. At the IMF, he worked on resolving
financial crises in Mexico,
Russia,
and Southeast Asia during the 1990s. He was mis-educated at the London School
of Economics and MIT, along with many financial
banking leaders. Under Fischer, the nation
of Israel made a distinction. As central bank head,
he led the movement early to raise interest
rates, making it the first nation to take
such a step toward stabilization.

Regard the imminent departure of Fischer as an important symbolic event. The
mentor of Chairman Bernanke is leaving,
possibly because he anticipates some dire
events to occur. Benjamin might be tired
of seeing his thesis disproved by current
events, or tired of operating the Weimar
machinery without a proper license. Ben
might not wish to be present when a controversial
seizure of private US wealth is ordered for to cover the USFed's
ruined balance sheet. He might not wish
to be in office when the global isolation
and rejection of the USDollar occurs. Or
when further exposure comes of the USFed
having stolen official gold accounts. Or
when revelations come that the USFed and
other major central banks have been kept
afloat by narcotics money laundering, led
by the big US banks in coordination with
the USGovt security agencies. Consider
the Fischer resignation a key event, one
that augurs badly for the future of the
central bank franchise system, which has
failed in very open and extreme ways.
The USFed, the Euro Central Bank, the Bank
of England, and the Bank of Japan have all
embarked on a disastrous experiment to print
money and to cover government debts, which
has wrecked the capital structure, wrecked
the economic structure, wrecked the banking
structure, and wrecked the monetary structure.
Their Weimar experiment is soon coming to an end. The chief architects will
scatter like bugs in the summer sun.

Tyler Durden, editor of Zero Hedge, added a professional eulogy for Fischer.
He wrote, "Ben Bernanke's personal
mentor, and famous underwater investor in
Apple shares, has announced his intention
to step down. This resignation comes 10
months (and $100 lower in AAPL value) after
the central bank's announcement to begin
buying foreign stocks. Is this a harbinger
of the change in the old brigade, and does
it make Bernanke's departure one year from
today virtually assured? We hope to find
out, unless of course the most aggressive
and ambitious central banking experiment
in history to keep the global house of cards
afloat fails in the meantime."

A harsh eulogy was given by the London Siren,
who is far more unforgiving. He wrote, "Fischer
served as the thesis adviser to US
Federal Reserve Chairman Ben Bernanke at
MIT in the 1970s. Ben is a sham. His work
is sham. Quantitative Easing is a bond scheme
to enrich the rich. It has failed, another
sham. At the IMF, he worked on resolving
financial crises in Mexico, Russia,
and Southeast Asia
during the 1990s. Far from resolving, he
acted in the banker interests of the West.
He was a US agent sent to
destroy wealth and transfer assets to the
West. He was an economic hit-man extraordinaire."

◄$$$ JIM O'NEILL FROM GOLDMAN SACHS WILL RETIRE FROM HEAD POST AT GSAX
ASSET MANAGEMENT. A SIGN OF THE TIMES AND
PERHAPS THE FADING INFLUENCE OF GSAX ITSELF.
O'NEILL FORESEES BIG PROBLEMS AHEAD IN THE
CURRENCY WAR FRONT AND EVEN WITH BOND BUBBLES.
$$$

Terence James O'Neill will retire from his post at chairman of Goldman Sachs
Asset Mgmt. O'Neill is best known for
coining the term BRIC, the acronym that
stands for Brazil, Russia, India, and China.
They are cited in tandem as the four rapidly
developing growing economies. He joined
Goldman in 1995 as chief currency economist
and co-head of global economics research,
then became head of global economics, commodities,
and strategy research in 2001. By 2010,
he rose to chairman of their asset management
division. Indeed, he challenged conventional
economic thinking about emerging markets,
leading to anticipated significant economic
and social impact on the geopolitical stage.
The seminal piece was entitled "Building
Better Global Economic BRICs" dated
November 2001. In the essay, he predicted
that the weight of BRIC contributions, in
particular China, would grow as a proportion of world economic
output. In the following decade, stocks
from emerging markets outperformed those
of developed markets. A case in point. In
the ten years ending December 2012, the
Vanguard emerging markets stock index fund
had annual returns of 16.2%, while the Vanguard
developed markets index fund of non-United
States stocks returned 8.4% annually.

O'Neill remains active, and plans to continue in the field, stroking his ego.
In recent work, he foresees the threat
of currency wars and the risk of rising
bond yields. See the New York Times
article (CLICK HERE).
O'Neill is a mouthpiece of syndicate garbage,
from frequent interviews, but with occasional
insights. One well placed Hat Trick Letter
client has personally met and talked with
him. He found the GSax cog to be insufferably
arrogant with little interest in discussion
of relevant material with the plebeians
operating in respectable financial sector
posts. The term has been expanded to BRICS
to include South
Africa.

◄$$$ TIM GEITHNER HAS MOVED TO COUNCIL ON FOREIGN RELATIONS. ABSURD SPECULATION
SWIRLS THAT HE MIGHT SUCCEED BERNANKE AT
THE USFED. A LIKELY EVENT ONLY IF THE CENTRAL
BANK IS TO BE INTENTIONALLY DESTROYED, THUS
REQUIRING A BAGMAN. $$$

Outgoing Treasury Secretary Timothy Geithner has landed a job squarely in the
banking syndicate, in a privileged think
tank. His new office will be in New
York City with the Council on Foreign Relations.
He will offer his services to the slimy
puppeteer that conjures foreign policy direction.
The diminutive figure with small shadow,
small mind, and small perspective will fit
in as a wonk, a cog in the special adjunct
outfit that controls the banks, controls
much of the USMilitary, and unduly influences
political process on foreign policy. Geithner
is actually cited as being in line for the
USFed Chairman post, as laughable as that
is. Such an appointment would happen only
if the USFed is expected to be scuttled
and razed, a black hole to follow. The empty
headed speculation centers on the Timmy
the Tool moving to a transitional post without
much substance, like the CFR, having no
fixed tenure to lock him in office. The
Bernanke term as chairman ends later this
year. See the Fox Business News article
(CLICK HERE).

## G-20 AGENDA FOR REVOLT

◄$$$ THE LESSER FADING G-7 MEETING ISSUED SEVERAL BIZARRE STATEMENTS,
MOSTLY ON JAPANESE POLICY THAT DECLARED
UP WAS DOWN. A GOOD AMOUNT OF DOUBLE-SPEAK
IS EVIDENT AMONG THE MAJOR INDUSTRIALIZED
NATIONS. HYPOCRISY IS A BETTER DESCRIPTION,
AS THE COMPETING CURRENCY WAR IS RUNNING
RED HOT. TRUTH IS NOT TO BE TOLD IN ANY
PUBLIC FORUMS. THE G-7 SERVES AS PRELIMINARY
SESSION OF FADING IMPORTANCE FOR THE G-20.
MEETING. $$$

Any attempts to calm the Currency War fail quickly among the G-7 nations. The
elite group G-7 includes the United States, Japan,
Germany,
Britain, France,
Canada,
and Italy. Why Canada and Italy are still members remains a mystery. Worse,
France
now resembles a PIIGS nation. The G-7 completed
its charade before the most important and
more eagerly awaited G-20 takes place, starting
this weekend. All G-7 statements have been
murky and meaningless, quickly contradicted
afterwards. Confusion emanates and radiates.
The hypocrisy is thick. The drafted statement
contains a commitment to market exchange
rates and an agreement that governments
will not use fiscal or monetary policy to
drive currencies. The Japanese are in violation
before, during, and after such an absurd
promise. The push by Japanese Prime Minister
Shinzo Abe has resulted in a severe drop
in the Yen exchange rate, exactly as desired
by Tokyo.
The last formal commitment made in Marseille
France at the September 2011 meeting was a sham
of vacant meaning. Review of the text
back then provides the basis of pathetic
tragic comedy. It read, "[We have]
reaffirmed our shared interest in a strong
and stable international financial system
and our support for market determined exchange
rates. Excess volatility and disorderly
movements in exchange rates have adverse
implications for economic and financial
stability. We will consult closely in regard
to actions in exchange markets and will
cooperate as appropriate." Failure
on all counts. Read rubbish, deceit, desperation,
window dressing.

Both Germany and Canada
have expressed concern about the Tokyo
initiative, which has kicked the currency
war into high gear internationally. The
Abe Admin in Japan
actually denies actively pursuing a lower
Yen, which adds fuel to the fires of hypocrisy.
Their economic minister stated the FOREX
rates should be determined by the market.
Tokyo
claims that its bold monetary and fiscal
policies were appropriate. Quiet the laughter,
please, as the currency wars come to Moscow. As Ed Steer of GATA said it succinctly, "The G-20 forum,
which put together a huge financial backstop
to halt a market meltdown in 2009, is back
in the spotlight after a week in which the
Group of Seven rich nations tried, and spectacularly
failed, to speak on currencies with one
voice. The G-7 has long been the powerhouse
of financial diplomacy. But tension between
Washington and Tokyo has risen
over new Prime Minister Shinzo Abe's bid
to end two decades of deflation. The G-7
issued a joint statement on Tuesday reaffirming
[market driven FOREX rates]. Yet the
show of unity was quickly undermined by
off-the-record briefings critical of Japan." As the Jackass has stated
for the last year, the G-7 led by the United States is fading in importance. The broader
G-20 led by China is taking over control. In fact, the G-7
has morphed into a preliminary G-20 exercise,
to prep the hypocrisy, to express fear of
agenda, and to set the stage for the important
global forum. The lost prestige of the US
& UK
is very evident. Rebellion is next.

◄$$$ MOSCOW IS TAKING ITS ROLE AS ROTATING PRESIDENCY VERY SERIOUSLY ON
THE G-20 CONFERENCE. THEY SMELL AN OPPORTUNITY TO EXERT SOME INFLUENCE, AND TO INFLICT DAMAGE ON THE AMERICAN
DOMINANT ESTABLISHMENT ON THE GEOPOLITICAL
STAGE. $$$

The Group of Twenty Finance Ministers and Central Bankers are meeting in Russia. They will focus on reforming the international
monetary system, the stated priority of
Kremlin officials, who take the role very
seriously. At a preliminary press conference
in Moscow,
Russian Foreign Minister Sergei Lavrov reiterated
the clear Russian monetary and financial
priorities. The minister stressed the importance
of the mission. He said, "Decisions
have been adopted but only partially fulfilled.
Therefore, Russia and its BRICS partners and the G-20 co-members,
along with other like-minded parties, will
seek to implement the decisions on reforming
the international monetary and financial
system. The Russian Presidency will
pay due attention to the issues of enhancing
and broadening investment conditions, introducing
measures aimed at new jobs creation and
managing sovereign debt without provoking
global economic shocks." See the
4-Traders article (CLICK HERE).
If the West will not reform itself, then
the East will do so.

◄$$$ THE STAGE IS SET FOR THE G-20 MEETING IN MOSCOW.
EXPECTATIONS ARE HIGH FOR SOME BOLD ACTION.
THE UNITED STATES HAS OFFERED TOKEN REPRESENTATION.
THE DOOR IS OPEN TO GANG UP ON THE ANGLO-AMERICAN
AXIS WITH REBELLIOUS DECISIONS AND STERN
INITIATIVES. AT RISK IS A COLLAPSE OF THE
GLOBAL MONETARY AND FINANCIAL STRUCTURES,
EXTENDING TO MAJOR CURRENCIES, SOVEREIGN
BONDS, AND BIG BANKS. WATCH FOR GOLD TO
BE MENTIONED. $$$

As preface, the G-20 Meeting issued a preliminary communique (CLICK HERE)
in format with 26 major points for initiative
and action. The rules seem clear. They
will not single out Japan
for massive currency devaluation. They will
disregard the G-7 call to refrain from using
economic policy to target exchange rates.
They will not urge any national debts to
be cut as targets. Expect no clash over
currencies, since no nation can afford such
a negative signal. It will be implicit and
understood. While Japan
is seen as the big currency warrior, having
engineered a nasty 20% Yen decline, the
United States is seen as the
big currency destroyer, with its endless
bond monetization. Tokyo officials argue a priority of exiting recession
and deflation, the end game to debt abuse
and currency abuse, which they perpetuate
with more debt abuse and more currency abuse.
The path to currency weakness programs (aka
competitive currency devaluation) is to
remain intact. Such efforts are actually
economic defense mechanisms, to preserve
export industries. No nation can argue that
such programs are reckless or foolish. Remember
that all nations lose in the currency war,
yet no nation admits it.

The Europeans enter the fray as sideshow, sort of a lunatic fringe element.
Euro Central Bank head Draghi criticized
the parties on the currency war, calling
the battles inappropriate, fruitless, and
self-defeating, in his words. France has been a lone voice calling for Euro
exchange rate targets, which no nation desires,
but are consistent with socialist ignorance.
Bright but errant Christine Lagarde of the
Intl Monetary Fund said something stupid.
"The current talk of currency wars
is overblown. There is no major deviation
from fair value of major currencies."
Her comments have no bearing on reality.
Australian Treasurer Wayne Swan gave support
for the Japanese monetary policy, stating
each nation is entitled to foster growth.
Indonesia wishes to see a stronger Japan, whose domestic demand would aid their exports
generally to Asia.
Other nations have noted that the United
States has created
vast amounts of new money just like the
Bank of Japan. The desire is to criticize
the US
without mentioning the US.

The communique reflected a conflict brewing between Europe and the United
States over extending
a promise to reduce budget deficits beyond
2016. The US is a laggard and hypocrite, operating from
a broken political framework that is well
noticed. At successive meetings, Germany
has pressed the United
States to do more to
tackle debts. Washington
in turn has urged Berlin
to do more to increase demand, a lame reply.
See the Reuters article (CLICK HERE).
In the Jackass view, the Moscow
G-20 is the most important G-7 or G-20 Meeting
ever in modern history. It sets the stage
for the lesser nations to declare monetary
rebellion ag ainst the United States, United
Kingdom, and any other
Western Europe nation
that stands beside them. The foundation
is being laid for a global initiative to
replace the USDollar as the basis of global
trade, and consequently to replace the USTreasury
Bond as the basis for banking reserves.
The currency war is turning into an initiative
to unseat and dethrone the Almighty Dollar
after 70 years of dominance, if not hegemony.
The abuse occurred after the 1971 abandonment
and fracture of the Bretton Woods Accord,
the Gold Standard that the US
unilaterally discarded and trampled upon.

◄$$$ MEANING OF THE G-20 COMMUNIQUE IS AS IMPORTANT AS IT IS COMPLEX.
DO NOT TAKE IT AS STATED IN CONSTRUCTIVE
FORMAT. IT IS A DECLARATION OF WAR AGAINST
THE UNITED STATES & THE BRITISH FOR
THEIR MONETARY FORTRESS, THEIR BOND FOUNDATION,
AND THEIR BANK WEAPONS, ALL DEFENDED AND
WIELDED WITH BRUTAL FORCE FOR DECADES. THE
OLD SYSTEM WILL GIVE WAY TO THE NEW, BUT THE
AIR OF WAR MUST BE CLEARLY DEFINED AS THE
PARADIGM SHIFT IS IMPLEMENTED AND ENABLED.
IT WILL CAUSE SEVERE CHANGES AND CONSEQUENCES.
GREAT DISRUPTION COMES IN RESTORING BALANCE.
$$$

Consider the official communique. Point #5 addresses imbalances, structural
reforms, reserves, and productivity, as
well as volatility of fund flows and fast
moving currency exchange rates. This
is targeted towards the United
States, the United
Kingdom, and the PIIGS
of Southern Europe,
telling them to cut down on consumption,
to pursue structural reforms, and to enact
serious tax reform to create an environment
that boosts savings, not consumption.
The G-20 dislikes the Western emphasis on
stimulated consumption, since they see the
real issue is inadequate investment. The
hidden message is that the West fails to
understand capitalism anymore! The G-20
has pointed the finger directly at the USFed
and Bank of England, telling them indirectly
to stop QE and inflation abuse. China
insists that no trade barriers and tariffs
be imposed, another lob at the US. Conclude that the US
and UK are being isolated and warned quite
sternly to resist from QE, to stop stirring
trade war, and to put their fiscal house
in order. The BRICS are setting the
agenda with cooperation from Europe.
The constructive efforts will not succeed.
The world is ultimately heading for outright
rejection of the USDollar and British Pound,
with profound price inflation hitting in
US and UK.
Europe will fracture in the process, with
Germany turning eastward for alliances.

Point #9 addresses the need for local currency bond markets, to factor in regional
initiatives, and to encourage deepened financing
vehicles for economies from such devices.
It is a formal G-20 Action Plan given high
emphasis. This has huge implications. It
is an implicit rejection of the four major
bond markets, denominated in the USDollar,
the Euro, the British Pound, and the Japanese
Yen. Implementing such diversified bond
markets would transfer control away from
the Developed Market world to the Emerging
Market world. Such drastic development would
be deliver a huge blow to the bank cartel
which has a monopoly of control with bonds.
The initiative is probably being driven
by China, which wants wider acceptance and encouragement
for the growth of the Yuan-based credit
market. That is essential for a new global
reserve currency to be rooted.

Several important but minor points are addressed also. The G-20 has served an
ultimatum to the Intl Monetary Fund to change
the quota system. The ratios are absurd
in today's global economic makeup. Implications
will be felt in contribution requirements,
voting rights, and Special Drawing Rights
(currency basket). In the process, the United States would lose its
powerful blocking stake that controls votes.
The G-20 has given warning 1) to implement
Basel III rules, 2) to implement OTC derivative
reforms (Dodd-Frank), and 3) to allow for
oversight of the shadow banking system.
Translate to mean the Western banks are
warned to obey rules and to stop their global
derivative casino that threatens all. The
G-20 has urged more transparency in commodity
and energy markets. They wish to curb the
banks and hedge funds from exploiting commodity
producers via boom bust cycles. Emerging
markets want stable fair prices. Price control
devices and volatility is exactly what the
Developed Markets and their banks want to
continue.

◄$$$ MANTEGA OF BRAZIL EXPECTS A NASTIER MORE
OPEN CURRENCY WAR TO COME. THE OBJECTIVE
TO BOLSTER ECONOMIES WILL BE DIFFICULT.
HE PERCEIVES THE BATTLE
TO BE OVER SCRAPS, IN A RACE TO THE BOTTOM.
MANTEGA DOES NOT UNDERSTAND THE CORNER THE
UNITED STATES IS IN, EXPRESSING OPTIMISM
OVER THE FISCAL CLIFF EVENTS. $$$

Brazilian Finance Minister Guido Mantega first mentioned the term Currency War
over two years ago. He expects the global
war over currency exchange rates to become
nastier and more in the open. He makes a
subtle but important point, that European
countries should focus on reviving their
economies with more investments, rather
than trying to weaken the Euro to protects
jobs as France has emphasized. Until the global economy
is revived, the war will continue in his
view. Therefore, it will heat up fiercely
in the Jackass view, since all central bank
monetary easing works to destroy the capital
base gradually, and actually weakens the
global economy, not stimulate it. The Global
QE to Infinity is intended to aid banks
and to cover the government debts, NOT to
stimulate economies. The inflation is hitting
the cost side, not the wage side. It is
that simple.

Mantega has overseen policy action in his own Brazil
in the last couple years. The competitive
devaluation tool has been used. Brazil has actively sought
to depreciate its Real currency to protect
local manufacturers from shoes to suits
to buses and make its exports more competitive.
It has taken bold action to curb speculative
capital inflows with higher taxes, imposing
a tax on incoming funds that seek to exploit
their higher bond yields, which should be
higher. He make a great point that few central
bankers comprehend, "It is useless
for the European Union to try to get out
of the crisis by exporting more to the United
States, Asia, or even Brazil. We are battling
over the scraps. We are elbowing each other
to compete in a very restrictive market.
I think the most important discussion at
the G-20 will be the return of stimulus
policies." Mantega urged the European
nations to follow the pattern set by Brazil. It has been bolstering
investment by launching their own infrastructure
investment programs. He truly goes awry
in views of the United States. He believes that risks to the global
economy have reduced substantially after
a break-up of the EuroZone was averted and
after the United States avoided running
off a fiscal cliff by cutting a deal. The
EuroZone remains a broken amalgam even without
formal break-up. It needs to break up and
disband the common Euro. The USGovt would
greatly benefit from the $600 billion in
automatic tax increases and spending cuts,
which would start a prudent new trend. He
actually believes the global outlook has
improved, and risks have diminished greatly.
Nothing has changed except buying a little
time, very little time. See the CNBC article
(CLICK HERE).

## TRANSFORMATION OF AMERICA

◄$$$ ANONYMOUS HAS HACKED THE USFED COMPUTER SYSTEMS, WITH COMPROMISE
TO 4000 BANKERS AND COMMUNICATIONS. THE
BREAK-IN IS NOT SERIOUS, NOT YET. SOME BANKER
INFORMATION HAS BEEN OBTAINED, LIKE IDENTIFICATION
CREDENTIALS, NOT DEEP COMMUNIQUES BETWEEN
HIGH LEVEL BANKERS. THE CASE HAS ATTRACTED
ATTENTION OF THE USCONGRESS, BUT EXPECT
NOTHING TO FOLLOW. $$$

Members of the intrepid populist underground movement Anonymous claim to have
breached a computer system that the US Federal
Reserve uses to communicate with bankers
in emergencies. On Super Bowl Sunday February
3rd, the group boasted that they had compromised
4000 banker credentials from the USFed.
The back door used is from the Emergency
Communications System, which was compromised.
To date, no financial or monetary policy
information was breached. But they certainly
attracted attention. The USFed claims that
no critical operations at the central bank
was compromised. The FBI has opened an investigation
into the incident. Recent activity from
Anonymous pertains to Operation Last Resort,
which resulted in the death of Aaron Swartz,
an internet developer and activist who started
the website Reddit. Swartz was indicted
by the USDept Justice in July 2011 on charges
of wire fraud, computer fraud, unlawfully
obtaining information from a protected computer,
and recklessly damaging a protected computer.
Swartz allegedly had downloaded vast information
from JSTOR, an online library of academic
and scholarly journals and articles that
are available for a fee. The charges are
trumped up to the extreme, since open source
free information. Aware of a long prison
term, Swartz committed suicide on January
11th last month. The USGovt wished to make
an example of him, instead a martyr created.
One must wonder if a wrongful death lawsuit
might result.

Not deterred, Anonymous then hacked the website of the US Sentencing Commission,
in reaction to Swartz's death. The case
has garnered the attention of the USCongress.
Members of the House Oversight & Govt
Reform Committee have written queries to
Attorney General Eric Holder on the handling
of the case. See the ABC News article (CLICK
HERE).
Expect nothing of substance to follow, just
like with Mexican Gun Running case led by
Holder himself. So Anonymous and WikiLeaks
are both active in exposing official corruption,
while Occupy
Wall Street is essentially defunct, having
been run out of town and treated like terrorists
before the Gestapo.

◄$$$ DISRUPTION TO THE OBAMA II ADMIN COULD COME IN STRANGE WAYS. A CHALLENGE
PERHAPS TO HIS CABINET PICKS COULD COME.
LATER STILL MORE DEVICES ARE WORTH WATCHING.
$$$

It is worth watching, strange theater to be sure. It will be interesting to
see if the Obama II Admin is hindered (even
halted) by means of his picks. The motive
behind opposition might be unstated, like
abhorrence for his claimed right to murder
citizens, even with domestic drone strikes.
Much attention has come to the unprecedented
voter fraud behind his election, including
some Ohio officials who boasted at having voted twice for Obama. Such is
bad press attention. Watch for obstruction
to passage or even procedural progress on
his next legislation bills. Look for hounding
and possible isolation of Congressional
House & Sentate leaders. The scuttlebutt
with the most substance centers upon Senators
who might work to block upcoming Obama appoinments,
such as Treasury Secretary and CIA Director.
See the PressTV artic le (CLICK HERE).
If obstruction goes out of control, look
for blockage of Michele's expense account,
or commotion over Secret Service protection,
or USMilitary revelations of his past identity.
In the extreme, a signal would be temporary
block of AirForce One usage. Just kidding.
But since it served more like a campaign
bus, that function is no longer relevant.

◄$$$ THE N.D.A.A. LAWSUIT MIGHT BE HEADED TO THE SUPREME COURT. THE HIGHLY
CONTROVERSIAL EXECUTIVE ORDER TO KILL US-CITIZENS
WITHOUT DUE PROCESS, WITH NO FORMAL CHARGES,
IS FACING DIRECT CHALLENGES IN OPEN DISCUSSION
WITH GRAPHIC EXAMPLES OF DRONE STRIKE TACTICS.
EXPECT THE FASCIST
STATE TO MORPH
INTO A DICTATORSHIP VERY SOON IN A FORMAL
DIRECTION, WHILE IN PARALLEL THE USECONOMY
BREAKS DOWN VISIBLY. $$$

The National Defense Authorization Act (NDAA) lawsuit will set itself up as
a key turning point event that exposes the
United
States as a nazi nation.
It could be the most important lawsuit in
the nation's history, along with the various
civil rights and abortion cases. Recall
that the Patriot Act has never been the
object of formal lawsuit. This case is about
permission for a tyrant leader to kill citizens
for any reason at all, or no reason. If
supported and upheld, it means the president
and cohorts that form the ruling syndicate
can kill anyone who opposes them, who works
to expose their criminal activity, who works
to reveal their many sordid deeds, who strives
to reveal their identities and past assocations.

The USGovt executive branch wishes to secure permission to kill enemies of the
state, in order to secure our way of life,
to protect our freedoms, with the exception
the non-white types of ethnic origin, such
as the immigrants. Once obtained, then the
permission is used wherever they wish, to
kill people like organizers of state secession
movements, or directors of class action
lawsuits against corrupt banks, or litigants
seeking disclosure of USFed activities,
or website editors on mega crime events
like 911, or even newsletter writers for
instance. Section 1021 of the NDAA allows
for the indefinite detention of American
citizens without charges or a trial. All
the above could be sent to a prison in Texas or Alaska forever on
a whim, a suspicion, a retribution, a personal
vendetta, or on false testimony. Such actions
are pure nazi that would make the Gestapo
proud, even Hitler himself, maybe Stalin
too.

Journalist Chris Hedges and several others have filed lawsuit against the Obama
Admin on the grounds of the NDAA being unconstitutional.
Judge Katherine Forrest agreed and issued
an injunction on it. The decision was immediately
appealed by the Obama Admin to a higher
court, which promptly issued a temporary
stay on the injunction. The higher the court
in the United
States, the more corrupt
the ruling body. Oral arguments have begun
in front of the 2nd Circuit Court. As Chris
Hedges states in the interview below, if
the USGovt wins the case then it will likely
be brought in front of the Supreme Court
within weeks. On the other hand, if the
Obama Admin wins and the Supreme Court refuses
to hear the appeal, Hedges concludes, "At
that point we have just become a military
dictatorship."Expect the worst,
since the higher courts have given rubber
stamps on several important cases recently,
like with MFGlobal and the incorrect application
of bankruptcy law against a brokerage firm,
like with the FBI case against the Russian
man who stole the Goldman Sachs trading
theft device, like the cases against the
Wall Street banks on narcotics money laundering
for tiny fines, like the limited mortgage
bond fraud cases against the big US banks
with grand attempts to corrall all sector
liablity for tiny awards, like the case
against the USDollar by the Gold Anti-Trust
Action group. The Supreme Court has been
slowly stacked by fascists with strong leaning
toward state powers. The latest member Elaine
Kagan won approval by protecting Obama on
lawsuits concerning his birth and passport
identities, and by her protection of Goldman
Sachs during lawsuits for mortgage bond
fraud. See the Zero Hedge article (CLICK
HERE).

◄$$$ A RASH OF MILITARY EXERCISES HAS BEEN COORDINATED WITH POLICE. SO
FAR MIAMI AND HOUSTON HAVE BEEN SITES. MORE COMING, AS THE POLICE STATE
ARRIVES, IN REACTION TO (OR CAUSE OF) CIVIL
DISORDER. THE PUBLIC HAS BEEN AND WILL BE
TERRIFIED. $$$

Numerous times in recent days in late January and early February, the nation
has seen large scale urban warfare exercises
being conducted in American cities. The
first occurred in Miami Florida, the second in Houston
Texas. The events featured large scale deployments, with full usage
of machine guns firing blanks and swooping
attack helicopters. These have been joint
exercises held with the USMilitary and police
forces. The ordeals have been terrifying
for residents who claim they were not warned
ahead of time in any manner. Witnessed described
a virtual war zone, as the public had no
way of knowing that the rounds being fired
were not real bullets. The Houston
warfare exercises resulted in a school being
locked down for a brief time, until they
could verify if the threat was not real.
An ambulance was dispatched, since the police
were aware of the exercises, but nobody
bothered to inform the fire & rescue
services. Reports were heard that a similar
event is set to occur in Chicago and another
in Pennsylvania. See the Backwood article (CLICK HERE)
and the Before Its News article (CLICK HERE).
One must wonder if Chicago
natives and Obama supporters will appreciate
the next round of urban warfare exercises.

For more on the rising police state, see the YouTube on the FBI Terror Factory
(CLICK HERE).
For a shocking bold admission of lies in
your face concerning the Benghazi attacks on the Libyan Embassy, with a dare
to the public on consequences of known lies
by outgoing Secy State Hillary Clinton,
see the American Thinker article (CLICK
HERE).

◄$$$ THE UNITED STATES WILL TRANSFORM INTO A NATION HARDLY RECOGNIZABLE.
THE INTERMEDIARY PHASE WILL PRECEDE ENTRY
INTO THE THIRD WORLD. CHALMERS JOHNSON IS
WISE, ARTICULATE, AND FEARLESS. THE SIGNPOSTS
READ OF ENDLESS WAR, LOST DEMOCRACY, PROPAGANDA,
AND BANKRUPTCY, ALL THE BITTER FRUITS OF
THE FASCIST BUSINESS MODEL EMBRACED AFTER
THE 911 COUP D'ETAT. THE NATION WALKS BLINDLY
BOUND WITHIN THE MODEL. $$$

Chalmers Johnson is fearless, an octagenarian, and a great patriot who sees
the highly dangerous destructive trends
for the United
States as a nation.
He wrote in "Sorrows of Empire"
in 2004 about the great sorrows. They are
worth a quick review since relevant in this
era. Remember that fascism is the natural
successor to democracy, with the parliament
eclipsed by a ruling board of czars. Think
Politburo.

"Four
sorrows are certain to be visited on the
United States. Their cumulative
effect guarantees that the US will cease to resemble the country outlined
in the Constitution of 1787. First, there
will be a state of perpetual war,
leading to more terrorism against Americans
wherever they may be and a spreading reliance
on nuclear weapons among smaller nations
as they try to ward off the imperial juggernaut.
Second is a loss of democracy and
Constitutional rights as the presidency
eclipses Congress and is itself transformed
from a co- equal executive branch of government
into a military junta. Third is the replacement
of truth by propaganda, disinformation,
and the glorification of war, power, and
the military legions. Lastly, there is bankruptcy,
as the United
States pours its economic
resources into ever more grandiose military
projects and shortchanges the education,
health, and safety of its citizens." The sequence is happening precisely as he described almost a decade ago. In
fact, he describes a combination of a nazi
takeover and the engrained Fascist Business
Model that the Jackass has elaborated upon
since the inception of the Hat Trick Letter.
War, lost liberty, propaganda, and bankrupty
are the marquee effects of fascism and its
strong scarring effect on the national economic
landscape.

◄$$$ THE CONTROVERSIAL JACKASS ARTICLE HAS BEEN LOCATED FROM MARCH 2006.
IT RESULTED IN A DEATH THREAT, SINCE IT
OPENLY DISCUSSED THE NAZI PLAYBOOK AND METHODS
THEY USED IN THE 911 EVENTS. $$$

Many Hat Trick Letter subscribers have openly requested the original article
that resulted in death threat to me. The
other death threat related to similar topics,
delivered on stage at a conference in Munich
Germany in November 2006. The two events motivated
my departure from the nazi-led nation, the
United States. My main question
is how long the nation's inhabitants will
take before realizing the hidden nazi takeover
and visible coup d'etat by grandsons of
avowed nazis and their cadre bearing foreign
passports. The 2006 article laid out
some of the more basic Nazi Playbook tactics,
which continue to confuse 90% of sleepy
slow stodgy numb Americans. The US nation is not well-read in recent modern history.
The keys are a very big false flag event,
a smashing of glass, a call to war under
false cause, a fight against an invisible
enemy army, broad dubious labeling of enemies,
snatching broad security powers, subjugation
of parliament, gigantic military budgets,
glorification of endless war, theft of foreign
gold accounts, aggression toward enemy and
ally alike, collusion with foreign castle
dwellers, and heavy doses of media propaganda.
These are neo-Nazis with far more tools,
and far more control of the system than
70 years ago. The material in the public
article resulted in death threats twice.
It was entitled "Mosques, Civil
War, Oil & Gold" and was published
by many usual supporting web journals that
have posted my work since 2004. Here is
a Gold Seek article link (CLICK HERE). By the
way, a couple of editors found the article
too hot to handle for to post back then.
Upon a quick review of the article this
week, gotta say some rather good jackass
insights back seven years ago. So much has
happened since, mostly in line with the
analysis presented.

##
USDOLLAR LOST CONTROL

◄$$$ CASH USDOLLARS ARE BEING REJECTED IN JAPAN,
WITH AN EXCUSE GIVEN OF WIDESPREAD COUNTERFEIT.
THE REJECTION HAS BEGUN. THE PRETEXT IS
COUNTERFEIT CONTROL SO FAR, A VALID CHARGE.
THE NEWS IS WORTH WATCHING FOR A MUSHROOM
OF REJECTION. $$$

Jim Kunstler offered a morning blog that featured an interesting comment by
one reader. He referred to a trusted friend
with a global perspective. Check out comments
by a Pat Ormsby posted on February 11th.
He wrote, "I was alerted by a source
that I do not trust (Benjamin Fulford) that
a dual US currency has arisen, and this
was confirmed by a source I do trust (a
personal friend engaged in international
commerce). Apparently, dollars issued overseas
are being accepted as international currency,
but dollars issued and circulating in America
are increasingly not. People returning
to Japan
from America,
for example, and attempting to exchange
their dollars are being told they cannot.
I learned this just a few days ago and have
not been able to find anything on the internet
about it yet. I guess most travelers just
use plastic, and the Japanese are stoic.
They are told there is a problem with counterfeits.
Fulford speculates that this is overseas
bank reaction to the Fed's massive printing
of dollars." See the Kunstler weblog
(CLICK HERE). A valid
charge indeed!

What incredible irony. An accurate pretext to refuse USDollars from the United
States, as they might
be counterfeit. In fact, the printed money
is not real or valid, only accepted as legal
tender. Yet the USFed monetary expansion
appears to be massive counterfeit of wealth
to cover a truly broken system. In the case
of Japan, not accepted widely. This is an interesting
angle to pursue by foreign nations in response
to the hyper monetary inflation, which by
any other name is a sanctioned counterfeit
operation. The process is moving along
to trap USDollars on the home front.
The ultimate higher truth is that QE IS
COUNTERFEIT for its bond purchase with printed
money. One must wonder if soon a certain
Mark of the US will be put on the domestic
USD for trapping purposes over time. It
is full of intrigue that the trapping process
might originate from outside the US borders. The global reaction
in rejection of the USDollar is going to
achieve fierce levels, with many fronts.
Amazing the early consequence to hyper monetary
inflation being the entrenched norm. The
arrogant desperate bankers believe they
are in control. They are fast being isolated.

◄$$$ MONETARY BASE HAS ENDURED A BREAKOUT. THE RUIN OF MONEY IS FAR PAST
FIXABLE. A DAM HAS BROKEN, AND USDOLLARS
ARE FLOWING IN GIGANTIC WAVES. $$$

A buildup of USDollars has taken place. Last month it was reported that due
to accounting gimmicks, the monetary aggregate
base was not showing growth. It was disguised
for its big recent burst. The release of
recent data reveals the growth. What started
with the reaction to the Lehman Brother
episode has continued with a series of Quantitative
Easing chapters that has nowhere ended.
See the St Louis Fed data source (CLICK
HERE).

◄$$$ CHINA ACCOUNTS FOR NEARLY
HALF OF WORLD'S NEW MONEY SUPPLY. THE UNITED
STATES IS LOSING CONTROL OF ITS CURRENCY,
AS THE GLOBAL FINANCIAL COLLAPSE FORMS LIKE
A GATHERING STORM OF ENDLESS NATURE. IN
YEAR 2012, THE USFED INCREASED THE MONEY
SUPPLY BY $1 TRILLION. BUT IN THE SAME 2012,
THE CHINESE INCREASED THE USDOLLARS IN BANK
DEPOSITS BY OVER $2 TRILLION. THE USFED
IS BEING OVERWHELMED. DIRE EFFECTS AWAIT.
$$$

China slowly is taking control of the foreign
based USDollars. To be sure, the USFed is
pumping liquidity on the European fires
like a fleet of fire trucks. But the Chinese
are quietly in control of production of
almost half of the new money. The newest
capitalists on stage have learned to abuse
the monetary press as well. They do not
make the news for such a grand feat. But
as they introduce new financial vehicles
to settle global trade, they will be in
position to convert large blocks of USDollars
in the process if they wish. What irony
if China
is printing USDollars to fortify a new trade
system that settles outside the USDollar,
or even using new money to purchase gold
bullion for the trade system core. Back
in 2005, China
owned less than half the total US
deposits. Since then, China
has pumped enough cash into the economy
using various public and private conduits
to make a gigantic impact. Between January
2005 and January 2013, total Chinese bank
deposits have soared by a whopping $11 trillion,
having risen from $4 trillion to $15 trillion.
Their monetary expansion in US$ terms currently
stands at between 200% and 300% of their
national GDP.

Furthermore, between January 2012 and January 2013, the total Chinese bank deposits
rose by over $2 trillion. Most attention
has been focused upon the Bernanke Fed and
its manic expansion of the domestic money
supply, by a cool $1 trillion in base money
creation in 2013 alone. Contrast that data
point with the fact that loan creation by
commercial banks continues to decline in
the United
States, which means
the US
banks have morphed into casinos conducting
USTBond carry trade, toxic bond redemptions,
and derivative coverups. Well, turn to China, which has created more than double this
amount of money in the recently completed
2012 year. See the Zero Hedge article (CLICK
HERE).

◄$$$ THE USFED IS LOCKED INTO A HYPER MONETARY EASING, SINCE ITS BOND
PURCHASES EXCEED THE ENTIRE USGOVT DEBT
ISSUANCE IN THE FORM OF USTREASURY BONDS.
THE PROGRAM EXCEEDS BASIC BOND PURCHASE
IN LAST RESORT. THE CENTRAL BANK CONTINUES
TO MONETIZE THE FINANCIAL SYSTEM, NOT JUST
THE SOVEREIGN BOND. MANAGED FINANCE HAS
GONE HAYWIRE WHILE THE MECHANISMS FOR BALANCE
ARE ERODING OR GONE. TO MAKE ROOM, THE USGOVT
DEBT LIMIT WAS SUSPENDED TO MAY 2013. $$$

To put it simply, so far this calendar year 2013, the Federal Reserve has bought
more USGovt debt than the USDept Treasury
has issued in securitized bonds. At year
end 2012, the total USGovt debt was $16.4327
trillion. The legal limit was hit. In early
February, the USCongress enacted a law to
suspend the federal government debt limit
until May 18, 2013. Added debt can be tacked
on legally. By February 6th, the debt had
grown by $47.2 billon in the new year. Consider
the USFed bond account. At the close of
business on January 2nd, the USFed had possession
of $1.661 trillion in USTreasury securities.
By the close of business on February 6th,
it owned $1.7172 trillion, for an increase
of $51.1 billion in the new year. Thus
their purchases of USGovt
debt in this calendar year have exceeded
the Treasury net debt issuance by about
$3.9 billion.
The only USTBond buyers left on stage are
the USFed press with Weimar
nameplate.

The venerable ruined USFed, center for American financial crime, announced that
it will continue purchasing additional longer-term
USTreasury securities at a pace of $45 billion
per month. All hail the Fed, broken as it
is. A footnote that the US central bank
purchases much more than they openly discuss,
covering much mortgage bonds that have spurious
value discharged by the big US banks. Quietly with little fanfare, the
USFed is monetizing all that has been ruined,
which means much of the entire US
financial system. The bond market has
gone far out of control in utter insolvency.
Next they might examine wrecked big corporate
bonds and a smatter of junk bonds. Why not,
since money is free? See the CNS News article
(CLICK HERE).

◄$$$ JANET YELLEN HAS GIVEN FIRM SIGNAL FOR Q.E. TO INFINITY, PRECISELY
AS THE JACKASS FORECASTED. THE STIMULUS
IS FOR SPECULATION AND FOR RISING COSTS,
IN NO WAY ECONOMIC. $$$

The Jackass claimed in 2009 that the USFed could not execute any Exit Strategy,
or else cause a calamity for the big banks,
the USGovt, and financial derivatives. So
far the call has been on the mark. When
the Quantitative Easing desperate lunacy
began in 2010, the Jackass claimed it would
have numerous follow-on QE chapters. Then
my conclusion was that QE to Infinity would
be justified in a forever policy. So far
the call has been on the mark. In a recent
speech, the weather vane Janet Yellin confirmed
the Jackass forever call. She said, "The
Federal Reserve may keep interest rates
near zero after its bond buying ends, even
after hitting its targets for unemployment
or inflation, in order to maintain stimulus."
Clear as a bell, not even a flinch, no surprise
to the Jackass. The confirmation is of Weimar
Amerika. Those who accept the monetary policy
as sound and sustainable are mentally deficient,
to put it bluntly. The QE to Infinity Forever
is the monetary policy, as in Reich Finance.
Stimulus is not reason, but rather avoiding
a collapse. See the Bloomberg article (CLICK
HERE).

◄$$$ A USFED GOVERNOR HAS URGED A $33 TRILLION (NOT BILLION) BOND PURCHASE
PROGRAM. THE ABSURDITY OF THE SITUATION
HAS GROWN TO NEW HEIGHTS. HE ACTUALLY BELIEVES
THE USGOVT FISCAL DEFICITS COULD BE MANAGED
BY A 10-FOLD EXPANSION OF THE USTREASURY
BOND CARRY TRADE. HALF THE PACK OF BANK
LEADERS IS FULLY INSANE. $$$

David Kemper is a moron who wears a suit and collects a grand paycheck. He is
a former president of the advisory council
at the US Federal Reserve. He is currently
plying his heretic trade as CEO of Commerce
Bankshare. Consider that his viewpoint is
somewhat typical of those conducting the
insane Weimar Amerika experiment to print
money to cover the bills. He actually said,
"Why not expand the Fed balance
sheet exponentially, from its current $3
trillion to $33 trillion. Would $30 trillion
in extra buying power be inflationary when
our entire current GDP is only about $15
trillion? Maybe, maybe not. But we need
a game changer here. First let's celebrate
the USFed record profits and its contribution
to reducing our deficit. Then let's seize
the moment to do something truly grand:
to eliminate that stubborn deficit. We
have the tools, and I for one say let's
give it a try." The insane parade
continues with bankers leading the way like
pied pipers unaware of their folly.

The bizarre main attraction at the USFed has turned even more strange. The
central bank just announced a supposed $90
billion profit for 2012, which must have
excluded all their toxic bonds with no buyers
globally and no markets in existence, which
should take a near total writedown loss
(since no market). They will with glee
pass along the profits to the USTreasury,
sure to put a dent in the $1.3 trillion
deficit. The details are as ugly as the
practice is obscene. The USFed profits are
apparently twice those of Apple's after
tax income. All hail the Fed. The central
bank employs a tried and true device, the
USTreasury carry trade. They borrow at 0%
and earn 2% or 3% from long-term USTBonds.
How simple, profits for free. Thus the obscenity
laced with heresy. Given its resounding
success in fabricated paper profits in a
market long vanished, the wisdom seems to
urge a 10-fold expansion from prudent stewardship.
More insanity.

The moron Kemper demonstrates his mental deficiency by
arguing that QE Cubed (his label) could
move to a $33 trillion balance sheet, return
$900 billion to the USTreasury, and work
toward closing the USGovt deficit. Alchemy is wonderful. The moron goes on like on batteries, explaining that
available bond supply could come from $16
trillion in all the USGovt debt, as well
as most of the USAgency Mortgage debt. The
debt could all be wiped out. Monetize it
all. The foreign creditors could be satisfied,
from the Chinese to the Japanese, the Saudis,
even PIMCO. This is better than helicopter
dumps on the masses, since it could restore
the USGovt to fiscal balance. Kemper urges
that we seize the money and continue the
laudable success. He seems unaware that
the only buyers to the outsized expansion
of USTBonds would be the USFed also, in
self-dealing. He seems unaware that the
expanded experiment would frighten foreign
USTBond holders into a revolt and rejection
the Weimar Dollar itself. Repeat, Kemper
is a monetary moron. Half the USFed is comprised
of such fools.

The USFed governors are almost all converting to blind men on the extremely
harmful effects on USTBond investors. Their
arrogance is beyond repair and their self-admiration
beyond rebuke. They are inflicting irreparable
damage to the USDollar and USTBond. They
are the Weimar engineers with better suits, who replaced
wheelbarrows from the past era with better
levered computers. The USDollar is in the
process of being isolated before rejected.
In fact, QE to Infinity is the clarion
call to organize for the rejection.
The Third World awaits the United
States, very very deservedly.
An alternative suggestion would be to hang
Kemper from the lampposts on Wall Street,
or to strip him then tar and feather him
with monopoly money. The argument and rationale
is frightening and comical. This guy is
CEO of an important regional bank and advisory
to the USFed. He seems tragically out of
touch with reality, and unable to comprehend
the Ponzi scheme. See the Zero Hedge article
(CLICK HERE).

◄$$$ THE PROPAGANDA MACHINE IS IN FULL GEAR, PROMOTING THE VIRTUE OF FREE
MONEY PRINTED. THEY ARGUE THAT ECONOMIC
RECESSION IS AVOIDED, AS ARE ALL THE VARIOUS
& SUNDRY EVILS OF INFLATION. THEY ARE
KILLING THE ENTIRE SYSTEM, CORRODING ITS
CAPITAL, PRESIDING OVER SYSTEMIC FAILURE
UNDER THEIR NOSES. THE LUST FOR POWER TO
REIGN OVER THE RUINS IS A STRONG MOTIVE.
THE PUBLIC MUST BE FALSELY INDOCTRINATED
TO ACCEPT THE CLIMAX OF PHONY MONEY WITHIN
A FAILED SYSTEM. $$$

The United States has a partner in monetary crime.
In Great
Britain, Adair Turner
is chairman of the UK Financial Services
Authority. He submitted a research paper
to the Cass Business School.
He is a heretic. In the essay, he spoke
about the virtues of monetization, referring
to it as a true breakthrough. According
to the alchemy of money creation, Turner
claimed that central bankers and politicians
should no longer consider as taboo the handing
out of newly printed money directly to citizens
of governments. Witness moral hazard.
He went further, claiming that monetary
financing of tax cuts or government spending
should continue until economic activity
revives. It will never revive under the
current monetary regime, the Jackass claim.
Therefore UNTIL means FOREVER. In his heretical
treatise, Turner argued that monetary
financing shows that long-term stagnation
can be averted. Witness stupidity. He
attempted to contradict the standard notions
that dumping money on the masses is dangerous
or reckless. He anticipates no dire effects
from hyper-inflation and lost faith in the
currency. Witness myopia.

The reaction in his demented view has been that the Japanese 20 years of stagnation
can be avoided. The Western world is
moving leaps toward monetary financing,
rather than to endure the hardship from
rebalancing that is so urgently required.
Witness a cowardly control of power. The
politicians and banking leaders are determined
to make the monetary climate much worse.
Expect something worse to befall the United States and United
Kingdom and Western
Europe. Three years from now, the West will
crave the stagnation that Japan suffered, as the West
endures certain relentless collapse and
the guaranteed ruin of the economic platforms.
The central bankers are printing money
and killing capital without realization,
the outcome of heresy wrapped in folly.
As the Shamrock from the options pits in
New
York said, "These banksters should
dedicate five minutes of the nightly newscast
to report on how great printing money is.
The brainwashing phase is in high gear.
It is obvious the UK
is about to ransack the Pound Sterling."
The arbiter might be the FOREX market. See
the Reuters article (CLICK HERE).
Monetary inflation and managed finance from
the Weimar offices is being promoted as a good thing to the masses.

◄$$$ THE EXCHANGE STABILIZATION FUND IS THE PRIMARY VEHICLE FOR THE USGOVT
TO INTERVENE IN THE BIG FINANCIAL MARKETS,
LIKE CURRENCY, BOND, AND STOCKS. THE GIANT
SLUSH FUND CONTROLS MOST OF THE GLOBAL FINANCIALS,
AND DEFENDS THE AMERICAN EMPIRE. LATELY,
IT HAS DEFENDED THE US-BASED FINANCIAL CRIME
SYNDICATE THAT HAS WRESTED CONTROL SINCE
THE 1990 DECADE, HAVING MADE THEIR EMPHASIS
STAMP OF SEIZED CONTROL ON 911. $$$

The Exchange Stabilization Fund (ESF) is run by the USDept Treasury. It is the
most extensive pernicious vile fund on the
planet, used and abused to control currencies,
sovereign bonds, derivatives, and bank stocks.
If it were shut down for two months, the
US currency and financial
securities would collapse. Eric deCarbonnel
assembled an excellent five-part series
about the Exchange Stabilisation Fund. It
is a great tutorial intended to teach the
basics of the USGovt market intervention
and corruption of the free market equilibrium
mechanics. See the Daily Motion video for
parts I, II, III, IV (CLICK HERE)
and part V (CLICK HERE).

The Exchange Stabilization Fund is a super secret fund to control activities
in almost all major financial markets, with
zero regulation and oversight. Operations
are conducted through the New York Fed,
which is essentially a manifestation of
the fund itself. The fund controls international
finance and its affairs. It manages all
interventions in financial markets. They
keep a low profile, using the USFed as a
front for interference, which speaks and
acts on its behalf. The ESFund was created
with zero planned oversight by the USCongress
in the 1930s to ensure support of the USDollar,
by the Gold Reserve Act. It has done a terrible
job, since the US currency has lost almost
all its value. The ESFund has been in control
of the USDept Treasury with absolute power.
As a result, the ESF has acted as a giant
slush fund that has funded the growth of
the American Empire over the past century
against the will of both USCongress and
many bankers in private industry. It is
managed by JPMorgan and Goldman Sachs, with
satellite assistance by servile Wall Street
banks. It has become a major syndicate weapon
and tool, to cover the tracks of the complete
pillage of the US Gold reserves held in
Fort Knox. It covers
the tracks of the big US
bank bond fraud. It covers the tracks of
the narco money laundering. It covers the
tracks of the US Stock market rescues. With
rejection of the USDollar, the ESFund will
be kicked into the corner, where in the
darkness of the Third World it will write its memoires.

◄$$$ THE FED'S BAILOUT OF EUROPE CONTINUES WITH RECORD $237 BILLION INJECTED INTO FOREIGN BANKS
IN THE PAST MONTH. THE USFED IS RUNNING
A VERITABLE BUCKET SHOP FOR GLOBAL ABUSE.
THEY CANNOT CONCEIVABLY HOLD TOGETHER THE
BIG BANKS OF THE WORLD WITH PAPER MACHE
AND HUBRIS. WHILE TALKING OF AID TO US-BANKS,
THEY DENY THE DOMESTIC BANKS WHILE HEAPING
ONE QUARTER $TRILLION ON EURO-BANKS IN A
SINGLE MONTH. $$$

In 2011, the USFed secretly funneled over $2.3 trillion
to Europe, from the
Dollar Swap Facility. It was basically free money, made at barely above the 0% rate on generous terms.
They are doing it again. In fact, it seems
in the last several months, more funds are
directed to Europe than to the US
zombie firms that stand erect but are listing
badly. History repeats. Back in June
2011, much of the incremental surge of $600
billion linked to QE2 excess reserves expansion
went to subsidiaries of foreign banks operating
within the United
States. The data
is available (thanks for Tyler Durden instructions)
on the H.8 Report every Friday night, line
item 25 on page 18. The pattern has been
renewed, to direct more funny money to the
still hopelessly insolvent European banks.
The chart below shows the surge to Europe.
A whopping $237 billion went to support
foreign banks from QE initiatives in January
alone, while US banks were denied.

The volume of $236.9 billion must be brought into perspective. It is greater
than the cash infusion seen after the Lehman
collapse. It is greater than the massive
buildup of cash during the spring and summer
of 2011 when the USFed's revived QE2 cash
spigot was turned on. That QE2 surge was
solely devoted to overfund European bank
cash reserves. They have US$-based debts
and obligations to contend with. In the
process, less cash has been made available
to US-based banks of small and large US
charter. Incredibly, of the record $1.8
trillion in cash sloshing within the US financial system overall,
a record $955 billion, or 52.6% of the total
is allocated to foreign owned banks.
The Fed is bailing out European banks while
American small businesses and consumers
have a very difficult time obtaining loans.

Cash in the US financial system is exclusively
a result of the latest open-ended QE, since
the volume in excess reserves created by
the USFed tracks tick by tick with the total
amount of cash held by US and foreign banks.
QE to Infinity is on track, to serve both
the US
and Europe alternatively.
Another way of showing this correlation
is to notice the change in excess reserves
versus the change in cash assets held by
foreign banks. It is almost exactly the
same amount. The latest QE round is exclusively
for European benefit. Tyler Durden of
Zero Hedge made a clear forecast. The European
banks will take the new channel of funds
from Bernanke courtesy, then push the Euro
exchange rate higher versus the USDollar.
Durden expects by the summer 2011 it will
go too far, and render damage to German
export economy. The action will invite yet
another central bank reaction to bail out
European banks by the global central bankers.
Expect a repeat of what the USFed did in
2011 with QE2. The action by the Euro Central
Bank two weeks ago was crystal clear. The
Draghi ECB moved to stop the sudden 10%
rise in the Euro currency over the past
two months. They were motivated to prevent
the collapse of what remains in Europe's
export economy. The Competing Currency War
has reached Europe.
On the Asian front, Japan
has also been actively pushing down its
own currency to promote its exports over
those from Germany and France. All players suffer in this nasty game.

The key effect of competitive currency devaluations is that EVERYBODY LOSES.
Worse, the USFed is a hypocrite, aiding
Europe and turning a deaf monetary ear to
the US banks. Durden concluded, "Things will
be just a little bit more acute as everyone
scrambles to be the exporter of only resort
to what little import demand remains in
a world, where everyone is desperate to
grow their trade balance through currency
manipulation. So whether European banks
will continue buying the EURUSD, or redirect
their Fed cash into purchasing the [European
Stimulus] outright, or invest in other even
riskier assets, remains unknown. What is,
however, known beyond a reasonable doubt
is that at least through this point, the
sole beneficiary of the Fed's open-ended
quantitative easing which launched in
September of 2012, and which was supposed
to help lower US
unemployment and raise inflation are once
again solely foreign. Read almost exclusively
European banks." See the Zero
Hedge article (CLICK HERE
and HERE).
The USFed sold QE3 to aid the USEconomy.
They lied. Witness a deceptive Weimar Amerikaner.

## USDOLLAR END GAME

◄$$$ THE PETRO-DOLLAR SUNSET HAS GAINED SOME ATTENTION. $$$

The Leap 2020 group from Global Europe Anticipation Bulletin in Paris
caught the Jackass article (CLICK HERE)
on the subject, and so did the Iran
news journal Hamsayeh (CLICK HERE).
Word is fanning out.

◄$$$ GOLD IS A MONETARY METAL, NOT A COMMODITY. ITS SUPPLY DOES NOT DICTATE
PRICE. THE LISTED PRICE IS CORRUPTED BY
PAPER GAMES AND DEEP CORRUPTION IN THE FINANCIAL
MARKETS. GOLD HAS DIFFERENT DYNAMICS, AND
WILL TAKE ITS ASCENDANT ROLE. REMARKABLY,
THE DEMAND IS INELASTIC, AND THE SUPPLY
IS INELASTIC. THEREFORE, DEMAND RISES WITH
HIGHER PRICE, AND SUPPLY
FALLS WITH HIGHER
PRICE. GOLD IS BACKWARDS, SINCE IT IS ARBITER
OF MONETARY ABUSE AND HERETIC PRACTICE.
$$$

The Economics field is an embarrassment to higher learning and advanced thought.
The traditional approach of looking at the
Gold supply from a global mining output
perspective is virtually meaningless in
determining its price. They overlook the
monetary aspect of Gold, even though a metal.
It has extremely few and limited industrial
applications, no longer even in dentistry.
Gold is not a commodity. A defiant argument
can be made. Although an estimated 170 thousand
tons exists above ground, almost all that
has been produced over milleniums, and although
2500 metric tons is produced each year by
mining operations, the gold price rises
instead of heading toward zero. Demand
is tiny for industry, while supply rises
steadily. The usual university blather on
Supply & Demand dynamics does not apply
in typical economic law. The professors
are admirers of each other, especially in
abstruce meaningless research journals.
Most gold bullion is held in strong hands,
which realizes its value during an era of
monetary destruction in the fiat paper chapter
coming to a conclusion. Other gold bullion
does not change hands or location over decades,
if not centuries. It is stored wealth by
the castle dwellers and other owners of
the central banks. The appeal is the stable
store of wealth and the absent nettlesome
counter-party.

Some stores of wealth like art works or antique cars hold spurious value. With
a new generation, the old Model-T car owners
saw value slide badly, while the old Chevy
Powerglide car came into vogue and wrested
value. But collectible art still is a great
value, except that sale often is difficult
with auctions (and their percentage cuts).
Even ancient coins involve a 25% cut to
the selling agent. Other issues involve
maintenance, storage, and insurance costs.
Gold is universally recognized as a wealth
asset, infinitely divisible, fungible, portable,
and highly liquid. The value of Gold might
be occasionally lost sight of, but it always
returns during enduring crises after broad
banker crimes end in tragic conclusion during
wayward eras.

The dynamics of Gold price determination are different.
Price is set by stock flow versus available
stock. If gold bars are put aside in vaults,
not intended for sale today tomorrow or
the next day, then those bars are not available
and do not push the price down in the typical
supply argument. The Economics professors
miss this point, being the blockheaded myopic
university crew, 35% of whom derive a salary
from the clandestine USFed research slush
funds. The stock to flow ratio is called
the STF ratio. For example, if every ounce
of gold in existence was put up for sale,
the STF ratio would go to one and the price
would plummet toward zero. Conversely, if
no gold ounces were made available for sale,
the STF ratio would goto zero and the price
would rise to great heights in a frenzy.
So Supply & Demand has a subset concept.

Next consider the concept of Gold inelasticity, a truly fascinating concept
with two sides. First, demand is inelastic,
meaning that a rising price attracts more
demand. Call it gold fever. The so-called
Giffen Good rule dictates a spike in demand
as price rises. Also, demand drops along
with a falling price. See the Brown Bottom
in 2002 in the gold price at $260/oz, with
miniscule demand visible. Demand for gold
is rising fast, while the monetary presses
are hyper-active. A rising price will attract
further new demand, as the public becomes
fiercely worried about their future and
their wealth stuck in paper bound by tax
chains and bad habits. The inelastic demand
phenomenon can be explained by the dynamic
of available stock being removed during
the storm. When that happens, the STF ratio
falls, lifting price. If applied to television
sets or cars or fine furniture, the dynamics
are exposed as very different. No vendor
wishes to hoard TVs, cars, or couches to
push the price up. Their carrying costs
are too high, obsolescence sets in, styles
change, and mold builds. For the gold bar
holder, no desire motivates the exchange
of gold stock for USDollars or Euros or
Pounds or SWFrancs or Yen, especially since
the avalanche of fresh tainted money continues
to pour out, changing the available stock
of fiat paper money. The savvy investor
holds the gold bars with a tight fist and
firm mind and enlightened spirit. The Gold
goes into hiding, as the central banks and
governments debase the money. The Gresham
Law dictates that bad (phony) money drives
out good money (gold). However, real money
emerges triumphant after the inevitable
crisis that ensues. See the Zero Hedge article
(CLICK HERE).

Consider Gold inelasticity briefly from the supply side,
which is more intriguing in my view. It
calls for lower supply coming to market
with a higher price, the opposite of mindless Economics professors and even
many financial mavens lacking all manner
of insight. The supply inelasticity concept
has been mentioned in Jackass analysis on
occasions for eight years. Here are some
dynamics. Many big mining firms are corrupt
to the core, stacking their Boards with
bankers who sell much more in forward contracts
than mine output. They are disguised naked
shorters who aid the corrupt Wall Street
bankers. As the price rises, the mining
firms are compelled to cover their big losses
on the wrecked short positions, removing
funds from operations. The result is
less money for projects, as they are less
capable to exploit the higher price. Another
pernicious inelastic effect has been seen
in recent months. As the central banks pursue
their coordinated currency debasement programs
by purchasing bonds with newly printed money,
they force an unintended effect. They lift
the cost of commodities, including foodstuffs.
The workers rebel, under strain to provide
for their families with rising food prices.
They go on strike, and less mine output
results.

Nations across the Andes region are on the move for both labor strikes and nationalization.
A similar effect operates at the macro level.
Governments suffer from slower economies,
tougher capitalist climates, and rack up
bigger deficits. So they turn to the mine
deposits, move toward confiscation, in a
movement given the name resource nationalism.
The governments take control, impose
their higher royalties and taxes, and introduce
their standard grotesque inefficiency. Lower
mine output results. See South Africa for the gold example. See Venezuela
for the crude oil example.

◄$$$ THE BANK OF JAPAN BALANCE SHEET REFLECTS A MASSIVE ABUSE OF MONETARY
AUTHORITY, WITH AN EXPANSION SEVEN-FOLD
SINCE 2006. JAPAN
AND SWITZERLAND
ARE THE GREATEST ABUSIVE AGENTS IN THE CURRENCY
WAR. THE JAPANESE CANNOT ESCAPE THE QUAGMIRE,
AND WILL TURN TO GOLD WITH ENTHUSIASM. $$$

Thanks to Stewart Thompson at Graceland for this story. Look at the growth from 2006 to present, a
massive seven-fold growth in their money
supply. The Japanese are fighting the painful
enduring costs of the zero bound interest
rate. They cannot escape it. In defense,
they print money to cover foreign debt purchases
in order to prevent a rising Yen exchange
rate. They print money to cover deficits
for reconstruction from natural disasters.
They abuse their currency like toilet paper,
which is actually given better treatment.
The United States does not learn
from their example, but rather repeats it
with multiples greater vigor and utter blindness.
Watch the Japanese follow the Chinese lead
in a thunderous march into Gold, as the
Asians reject the USDollar.

◄$$$ THE BANK OF JAPAN HAS TARGETED 13000 FOR
THE NIKKEI STOCK INDEX BY END MARCH. THE
LUNACY OF VALUE DECEPTION CONTINUES WITH
EVERMORE EXTENDED INSANITY. THE INTERNAL
TURF WAR IN TOKYO CONTINUES. THE EURO-YEN CROSS RATE HAS RISEN
HIGH ENOUGH TO CAUSE PROBLEMS, AS THE CURRENCY
WAR RAGES. $$$

Japan is losing its mind. Their desperation
in pushing down the Yen currency has extended
into other financial avenues. They target
their end of fiscal year. The Economics
Minister Akira Amari in early February actually
said, "It will be important to show
our mettle and see the Nikkei reach the
13,000 mark by the end of the fiscal year.
We want to continue taking steps to help
the stock market rise." To hell
with true value, as appearance rules the
way. They must hope the rampant inflation
spew does not reach the tangible economy,
but it will in time since they do not go
to lengths like the Americans to corrall
99.9% of benefits to the bankers. The Japanese
permit entire companies to remain zombies,
adopted by their conglomerates (keiretsus),
whereas the US permits only corrupt giant banks to remain
favored zombies. The inefficient allocation
of capital is mindnumbing in Japan,
as economic and monetary policy have turned
destructive.

The internal divisional battles continue in Tokyo,
having lasted for decades. The goals might
be shared, like lifting price inflation
to 2%. But battles continue. Talk swirls
that the Bank of Japan should not openly
purchase foreign currency bonds, since that
is the role for the Finance Ministry. Suggestions
are for the BOJ to purchase several hundred
trillion Yen worth of domestic financial
assets in an expanded QE program. They are
in essence urging a monetization of portions
of their industry. The insanity behind the
Japanese monetary push is fully supported
by the USDept Treasury, stated by minion
Lael Brainard. In contrast, the Bundesbank
chief Jens Weidmann said that discussions
about an overvalued Euro are simply a diversion
from the official task of sorting out their
economies. He urged the Euro Central Bank
to do no more on the monetary and bond front,
as they have already stretched their mandate.
The Euro-Yen cross rate has risen bigtime,
enough to crimp exports to Japan.
The new element in the Competing Currency
War is the cross rates, like the Euro-Yen,
like the Pound-Euro, and like the Euro-SWFranc.
Nations are waging battle to protect
their native economies. The war will intensify
much more.

◄$$$ CHINA HAS SURPASSED THE UNITED
STATES IN TRADE. BEAR IN MIND THAT TRADE
PRACTICES WILL DICTATE BANK RESERVES AND
THEIR MANAGEMENT. THE USDOLLAR IS POISED
FOR REJECTION. THE RISE IN CHINA
TO PROMINENCE WILL GO HAND IN HAND WITH
THE FALL OF THE AMERICAN EMPIRE, AND ITS
CERTAIN SLIDE INTO THE THIRD WORLD. ITS
PROFOUND DEFICITS AND IMPORT REQUIREMENTS
WILL FORCE A VERY BIG USDOLLAR DEVALUATION
AFTER IT IS ISOLATED. $$$

The rejection of the USDollar is on track, dictated by trade factors. The United States is set up for a massive upheaval.
Since 2005, a massive shift by China from an export dependent source of cheap
manufacturing and labor, toward a moderate
exporter and consumer hub has taken place.
It has recently become a currency powerhouse
with a new metals market in Shanghai.
The trend indicates that China
has positioned itself to decouple from its
dependence on US markets and the USDollar,
and to direct attention to Asian trade and
regional growth instead. For the past
decade, China
has been slowly but surely issuing Yuan
denominated bonds and securities around
the globe, while simultaneously forming
bilateral trade agreements with multiple
nations and cutting off the USDollar at
the pass of trade. As one should always
focus upon, trade dictates banking practices,
in order to make payment in trade settlement.
This process has almost totally ignored
by the mainstream financial media. Despite
being in possession of the largest FOREX
reserves, China
began to issue Yuan-based debt securities.
They are preparing for a new chapter. They
also have between five and eight times as
much gold held in reserves as officially
stated. They have actually been borrowing
more capital, more than required inside
the Chinese Economy. They have been creating
a financial platform with many sides. As
they moved away from export dependence,
they have been distributing their Yuan currency
worldwide, thus putting it at risk of an
increase in valuation.

It seems they anticipated a crisis for US
consumption. The Chinese reportedly are
responsible for triggering the adoption
in 2008 of Fannie Mae by the USGovt. The
event marked the beginning of the trade
war. The Beijing leaders
dumped mortgage bonds, and probably foresaw
the crisis without end in the United States. They expected
a marked reduction in US imports, and therefore
built trade deals within the ASEAN trading
bloc to insulate themselves. They expected
trouble for the USDollar, maybe even props.
For the last three years, they have been
busy converting much of their long-term
USTreasury holdings to short-term USTreasury
bonds that will either mature or being treated
as cash. By distributing the Yuan widely,
and cutting goodwill deals like buying up
impaired European bonds, they have curried
favor with the Intl Monetary Fund. If and
when the fully comprised and deeply corrupted
IMF leads in any movement to promote the
Special Drawing Rights as a new reserve
replacing the USDollar, the global banksters
might be more disposed toward the Yuan inclusion
in the basket currency.

A conclusion is clear. By taking multi-lateral action, China
no longer seeks to maintain the traditional
trade relationship with the United States. The trade war
has resulted in outright opposition to the
US role as custodian of the
global reserve currency. Back in 2005,
the Jackass forecasted the cooperative relationship
with China would turn adversarial in a couple years,
then hostile in open trade war. That war
is here, and the objective to earn more
global respect by Beijing
has come to an execution stage. They wish
to control the dominant currency for trade.
Lastly, China
has not only become the world's largest
gold producer, but also made strides to
be its largest buyer, recently surpassing
India. Official estimates place Chinese gold purchases
in 2012 at around 800 metric tons, a massive
increase in their stockpile. My sources
indicate their gold reserve increase is
multiples higher over the last few recent
years, an urgent project underway perhaps
to establish a gold-backed Yuan currency.
By contrast, the USFed cannot even deliver
gold it is supposed to be holding in official
accounts, including that held for Germany.
As footnote, China
has recently quadrupled imports of rice
and tripled its wheat and corn imports in
just the last year. China
is preparing itself, if not being groomed,
as an alternative economic engine in opposition
to the failing United
States, which is steeped
in horrendous economic policy, overcome
by banker corruption, and deeply committed
to self-annihilation by its own security
agencies. China is ready to dump the USDollar. See the Bloomberg
article (CLICK HERE).

The Chinese Economy has reached a milestone. It has surpassed the United
States for the first
time ever as the number one trading power
in the world. US
exports and imports last year totaled $3.82
trillion, according to the USDept Commerce
in early February. The Beijing-based
customs administration reported last month
that the Chinese total trade in 2012 amounted
to $3.87 trillion. The balance is far
more favorable for China
than the US
deficits, a chronic feature that laughably
has come with boasts from the knuckleheads
inside the US
chambers. China
had a $231.1 billion annual trade surplus
while the US had a trade deficit of $727.9 billion.

Nicholas Lardy from the Peterson Institute for Intl Economics wrote, "It
is remarkable that an economy that is only
a fraction of the size of the USEconomy
has a larger trading volume. The surpassing
of the United States is not because of a substantially
undervalued currency that has led to an
export boom." The point of proof
is contained in an important detail. The
Chinese imports have grown more rapidly
than exports since 2007, something not possible
for a badly under-valued currency. A
major turning point has been reached in
global trade. No doubt should linger that
China will next be inducted into the SDR basket.
Their trade with both Asia
and other major players across the globe
will increasingly move away from the USDollar.
As a result, the USDollar will surely lose
its world reserve status, and soon. While
many cheer the step as necessary progress
towards a more globally aware economic system,
the practical result will be to force a
profound devaluation of the USDollar on
the American citizens, their economy, and
their accumulated illusory wealth, including
pension funds.

The Jackass theme has been steady for almost five years. The Third World awaits
the United States when its currency is rejected and
must seek proper value as an equilibrium
is sought. Its gargantuan deficits, absent
critical mass of industry, predominance
of fraudulent financial sector, devotion
to costly wars, and massive import requirements
dictate a USDollar devaluation of 50%.
The shift will cause enormous disruption,
powerful price inflation, widespread supply
shortages, and civil disorder. Never lose
sight of the fact that the United States has turned heavily
dependent upon covering its debts by monetary
inflation means. The practice will backfire
badly, when the devaluation comes. Few seem
to recall that Third
World nations suffer currency devaluations
from lost control in expansion of their
money supply. The US
is no exception with consequence for established
and chronic monetary abuse. The US
will be isolated, then seen in glaring violation
of monetary controls, under a shameful spotlight,
as resident nazi cockroaches seek the darkness.
Then comes the 50% currency devaluation
as trade settlement ignores the USDollar.

◄$$$ THE CHINESE YUAN WILL SPREAD TO THE PERSIAN
GULF REGION. A BIG TRADE DEAL WAS STRUCK
WITH THE SAUDIS AND EMIRATES OF THE U.A.E.
LAST YEAR, WHICH WAS ACCOMPANIED BY A YUAN
CURRENCY SWAP FACILITY ESTABLISHED IN THE
UNITED ARAB EMIRATES. THE LAST NAIL IN THE
USDOLLAR COFFIN COMES WHEN THE SAUDIS PERMIT
NON-USDOLLAR PAYMENT FOR CRUDE OIL. THAT
DAY IS NEAR. $$$

The Chinese have taken more control of the Intl Monetary Fund itself. In January,
a plan was revealed by Zhu Min, the deputy
managing director of the IMF. He made a
statement where he proclaimed that the shift
by China
into a more self-sufficient consumer based
economy had been successful. The important
step would be followed up by placing the
Yuan currency as a world reserve currency.
The IMF has confirmed the Yuan (renminbi)
is set to become a Global Reserve Currency,
the acknowledgment made at an Economic Forum
in Hong Kong. See the Want China Times article (CLICK HERE).
The Yuan is being called a Global Reserve
Currency even by China, having established
the foundation for changes in a short period
of time. China does not reveal
their hand until everything is already said
and done. The USDollar has been owner of
the global reserve for decades, seemingly
forever. They must next share the control,
then suffer its loss in a grand comparison
in grotesque embarrassment and humiliation.
The USDollar will suffer the lost prestige
in practice very suddenly. The Chinese leaders
are crafty and patient and deliberate. They
put everything in place, making preparations,
and then reveal their movements and plans.

Recall that the Premier of China had gone to Saudi Arabi and Dubai
a year ago. He stayed a week, conducting
meetings and making agreements. China signed
economic and trade agreements worth 100
billion Yuan (=US$16 bn) with Saudi Arabia
and the United Arab Emirates, as Premier
Wen Jiabao completed a six-day visit to
the Middle East. The first currency swap
agreement with Arab nations, worth 35 billion
Yuan, was also signed in Abu
Dhabi. The news occurred last year, when
Premier Wen attended the Fourth Arab-China
Business Conference in Sharjah in the UAE.

Saudi Arabi is soon to announce being the last Middle Eastern country to trade
outside the so-called Petro-Dollar. If
(when) Saudi
Arabia initiates crude
oil trade in other currencies, then the
death knell is rung, as in game over for
the USDollar. Not just loss of the Global
Reserve Currency status, but the USDollar
will face isolation, judgment, criticism,
and finally severe devaluation following
the shameful debt downgrades. The US might be declared a financial
rogue nation, my expectation. Given how
the USDollar finds strength only in the
active competitive devaluation process managed
by numerous foreign nations, the USDollar
will next find its truly (much lower) value
when it is not used in global trade.
With the USFed printing the dollar non-stop,
the currency wars raging fierce, the US currency is poised for a massive fall. The
process stops when the USDollar is deposed
and the new Gold Standard is instituted,
led by its newly adopted role in trade settlement.
The only countries left all to themselves
with their inflating currencies will be
the United
States and United Kingdom and certain
Western European nations. They will form
the new Industrialized Third World community.
The day comes soon, signaled by both the
IMF and China. The Yuan will share
the stage as a Global Reserve Currency.
Do not be mistaken. The USDollar cannot
share that stage. It will fall off it rapidly.

For
some good background material on the internationalization
of the Chinese Yuan, aka renminbi,
see the Swift research papers (CLICK HERE
and HERE).
For promoting the London
financial center on Yuan currency issues,
see the City of London
research update (CLICK HERE).

##
BOND BUBBLE CRAZE

◄$$$ THE BIG NEW YORK BANKS ARE CONSIDERED CRIMINAL YET UNTOUCHABLE
IN FOREIGN FINANCIAL CENTERS. THEY OBSERVE
A REVOLVING DOOR OF CONFLICTED INTEREST
BY REGULATORS AND DEEP CORRUPTION BY USGOVT
LAW ENFORCEMENT. THE RESULT WILL BE FURTHER
ISOLATION OF THE USGOVT AND REFUSAL BY FOREIGN
ENTITIES TO PURCHASE USTBOND DEBT SECURITIES.
THE RESEMBLANCE TO THIRD WORLD WILL BE FOLLOWED
BY ACTUAL THIRD WORLD LOCATION. $$$

The Project on Government Oversight (POGO) has come to stark conclusions about
US-based bank fraud as being business as
usual. The foreign financial centers
observe the protected corrupt US
practices, and have refused lately to participate
in official bond purchases. They just say
NO. The result is further isolation of the
United States,
which will suffer a dire fate falling into
the Third World. The perception of the United States on financial
sector matters is badly degrading, in fast
acceleration, a consequence of a decade
operating under the Fascist Business Model
that few analysts notice or wish to mention.
The perception held by foreign bankers and
fund managers often is that New
York City has degraded to a level
on par with some Third
World dictatorships. The MFGlobal crystallized
the viewpoints, leading them to conclude
the New
York is no longer a safe place either to
do business or place money. China has refused to buy USTBonds from the New York bankers. Even the New
York press is unwilling to tell the truth
about events. A recent case showed the New York press actually changing the transcripts
in certain cases like one involving Zichettello.

Overseas, the New York big banks are called Untouchable. The end result is fast catching
up to the USGovt and Wall Street bankers.
Almost no foreign nation is willing to purchase
the USTreasury Bond debt, since the US
considers its leading financial firms to
be above the law. That includes the New
York Fed, which refuses to permit Germany to view its gold on account. The demise
of the United
States in a systemic
failure is assured. The perception extends
to where the USGovt and its banking leaders
consider its own people and foreign governments
to be part of a food chain for exploitation.
At risk is the fabric of US
society. My view has been firm since 2007
and 2008, when the bond market ruin and
big bank collapse took place, that the United States was heading for a grand systemic
failure and total breakdown. The path was
made perfectly clear. It is on track and
absolutely unstoppable.

The revolving door at the Securities & Exchange Commission is under focus
again, as the prima facie for corruption
in the financial sector. The POGO study
has exposed that SEC prosecutors are hired
so as to ensure the villain banks are not
subjected to criminal prosecution. Doing
so is seen as an attack on the system itself.
In one specific case, the head of SEC enforcement
Andrew Geist selected the law firm to be
the receiver over Princeton Economics and
made sure the employees could never be represented
by a lawyer. Then he resigned from the SEC
and joined the very firm he selected to
receive $millions in fees as a partner.
Outside of the USGovt, such action wold
result in 25 years in prison for basic fraud
in plain sight. See the Armstrong Economics
article (CLICK HERE)
and the CNBC article (CLICK HERE).

◄$$$ INVESTORS ARE SWAPPING LOW QUALITY SECURITIES (SOMETIMES JUNK BONDS)
FOR SUPER SAFE USTBONDS IN ORDER TO CONDUCT
DERIVATIVE TRADES. FINANCIAL FIRMS (BANKS,
INSURANCE FIRMS) ARE GROPING FOR YIELD INCOME,
PLAYING GAMES WITH COLLATERAL. THEY SOMETIMES
ARE CAUSING A CHAIN OF EVENTS IN REVERSE
WITH MARGIN CALLS. COMPLEXITY GROWS, BUT
NOT STABLE PROGRESS. $$$

An extract from a speech by USFed Governor Jeremy Stein entitled "Overheating
in Credit Markets: Origins, Measurement,
and Policy Responses" reveals how
shadow banking collateral transformations
operate, as modern day alchemy transforms
junk bonds into USTreasurys with the snap
of a contract, but causes problems with
margin calls down the road. The ultra-low
interest yield has caused contortions not
just for reaching toward risky mortgage
bonds for yield, but in doing two-step derivative
trades with transformed collateral.
The alchemy requires something called collateral
transformation. This activity has been around
in some form for quite a while, but it has
taken on tremendous volume in recent months.
The entire US financial has been put at
further risk.

Imagine an insurance company wants to do a derivatives transaction. To do so,
it is required to post collateral with a
clearing house, but the asset must be pristine,
like USTBonds. All the firm has is junk
bonds to post as collateral. So they approach
a broker dealer and engage in what is effectively
a two-way REPO transaction, whereby it
gives the dealer its junk bonds as collateral,
borrows the USTreasury securities, and agrees
to unwind the transaction at some point
in the future. A fee is paid by the
insurance firm, which then can proceed to
pledge the borrowed USTreasury securities
as collateral for its derivatives trade.
Usually the dealer has inventory, since
USTBond buyers are scarce with all the toxic
paper produced and frightened investors
from QE bond monetization going on. The
dealer might have to conduct a reverse swap
with a pension fund to obtain the USTBonds.
Pension funds are willing since they can
secure higher yields from such swaps, without
altering what appears on their balance sheets.
Now go back to the insurance firm, which
has secured via the swap some USTBonds as
collateral.

Stein concludes on risk. "There are two points worth noting about these
transactions. First, they reproduce some
of the same unwind risks that would
exist, had the clearing house lowered its
own collateral standards in the first place.
To see this point, observe that if the
junk bonds fall in value, the insurance
company will face a margin call on its collateral
swap with the dealer. It will therefore
have to scale back this swap, which in turn
will force it to partially unwind its derivatives
trade, just as would happen if it had posted
the junk bonds directly to the clearing
house. Second, the transaction creates additional
counter-party exposures, which [come
in the form of] exposures between the insurance
company and the dealer, and between the
dealer and the pension fund." The
evidence is loud and clear, and the higher
systemic risk is engrained. View the total
amount of collateral pledged any given month
with the NYFed, courtesy of tri-party REPO
custodian JPMorgan. It has risen 18% in
the last year. See the Zero Hedge article
(CLICK HERE)
and the NYFed tri-party REPO collateral
data (CLICK HERE).

◄$$$ HIGH RISK BONDS ARE SUFFERING A MAJOR EXIT. THE TALKING HEADS MENTION
RISK ON, WITH THE USFED LEADING THE MORAL
HAZARD PARADE. BUT JUNK BONDS TELL A RISK
OFF STORY. THE DIVERGENCE IS PRESENT, AND
NEVER LASTS LONG BEFORE RESOLUTION. $$$

In recent weeks the bond Exchange Traded Funds and credit derivative markets
have been indicating some serious divergence
from stocks. They scream signs of risk off.
The perceptual call on the financial networks
is deceptive and unclear. What is clear
is that this past week saw the largest outflow
on record for the High Yield ETFund. Furthermore,
HYG (symbol for the junk bond ETF) shares
outstanding have plunged over 11% in the
last 90 days, as ETF unit volume in existence
are being destroyed on a sequential quarterly
basis for the first time. Refer to HYG
shares, not value. The rotation appears
to be up toward USTBonds and Corporate Bonds,
and up in strength of capital structure
marked by book value. The divergence cannot
last forever, since linkage comes via the
balance sheet. The sell pressure is picking
up into the very illiquid market for junk
bonds. See the Zero Hedge article (CLICK
HERE).

◄$$$ USFED ENSURES HYPER INFLATION. THE PUBLIC MUST PROTECT THEMSELVES.
BUT THEY ALSO MUST EDUCATE THEMSELVES ON
THE REALITY THAT IS BOND MONETIZATION AND
THE ZERO RATE BOUND. THEY ARE SIGNALS OF
WEIMAR
AMERIKA, AN ENDORSED HYPER MONETARY INFLATION
WITH NO SUCCESSFUL PRECEDENT IN HISTORY.
$$$

For the mere mortals, some background is offered to comprehend the programs
that are called Quantitative Easing (bond
purchases with new electronic money) and
the Zero Interest Rate Policy (stuck at
0% forever). See the Forbes video (CLICK
HERE)
for a quick tutorial. Also, the unwashed
masses deserve to have explained the most
outrageous outlandish monetary experiment
ever conducted. It is most assuredly to
end in disaster. The flip into national
poverty status is coming. See the Before
Its News article on QE For Dummies (CLICK
HERE).

◄$$$ JPMORGAN CONTROLS A BIG MONEY ROOM IN FLORIDA,
WHERE $TRILLIONS ARE MOVED EVERY DAY ON
BEHALF OF BIG BANKS AND BIG CORPORATIONS.
DIMON SPOKE WITH ARROGANCE AND HYPOCRISY.
$$$

JPMorgan Chase maintains what they call a Money Room located in Florida.
In it $trillions are moved every day, boasted
CEO Jamie Dimon at a conference. He said,
"It is a money room at an undisclosed
location. It is in Florida,
but it moves every day $2 to $5 trillion
around the world. JPMorgan moves a lot of
money for corporations and individuals.
That room, which I took my Board of Directors
to, is just very impressive." JPMorgan
is the only bank with a giant money room
in the United
States. JPMorgan is
the biggest bank in the country by assets,
with total assets of $2.3 trillion as of
the end of September 2012. It is also bankrupt,
a tall hollow reed from the derivatives
market unreported losses. It keeps the Interest
Rate Swap structure in place, or tries to,
which forces the USTBond yields low when
no buyers exist.

Dimon talked openly about many topics, took shots at the press, and spoke like
a true hypocrite. He argued that big banks
are the only ones that have the power to
service countries around the world. He said,
"I agree with people who say banks
should not be too big to fail. It should
be bankruptcy and the damn bank board should
be fired. Tax payers should never have to
pay and you should believe it. I want to
call it bankruptcy for big dumb banks. There
should be some form of Old Testament justice
including clawbacks of [executive] compensations."
See the Business Insider article (CLICK
HERE).

Dimon --Criminal,
Hypocrite, Parasite

What a hypocrite and elite parasite! JPMorgan exploited the Lehman Brothers
and Bear Stearns collapses. JPM received
$138 billion in funds from a Saturday 6am
bankruptcy court decision in Manhattan that supposedly was devoted to settling
Lehman Bros private accounts. The sum is
an order of magnitude greater than what
would be devoted for such purpose. It was
in Jackass view an important reload of JPMorgan
slush funds used in a number of different
market manipulation schemes, such as USTreasurys
and Gold. They clearly exploited the situation,
as seen by anybody with an active brain
stem. As footnote, rumors are brisk that
Dimon has a penchant for married women,
who philanders with the wives of his own
associates. He walks a thin line. Harken
back to Tiger Woods.

◄$$$ OVER $19 TRILLION IN PRIVATE US-CITIZEN RETIREMENT FUNDS COULD EASILY
BAIL OUT THE USFED TOXIC BALANCE SHEET.
SIX DOLLARS OF CAPTIVE PENSION FUNDS EXISTS
FOR EVERY DOLLAR OF TOXIC USFED BALANCE
SHEET FUNDS. A FORCED INVESTMENT IN THE
USTBOND BUBBLE WILL COME BEFORE LONG, BECAUSE
IT CAN. $$$

The USFed has boasted of innovative devices and channels for providing a torrent
of liquidity to the insolvent US and European
banks, to no avail however. Extra cash to
borrow does not address brokenness from
insolvency for a bank or a household. Talk
has come of Bernanke possibly being forced
to raise interest rates in 2016. Doing so
would destroy his buddies at the big US
banks, which are deeply committed to USTBond
carry trade for easy profit, as they avoid
the commercial lending function. Bernanke
has the perfect exit strategy, steeped in
exploitation and hegemony. He could simply
sell the bonds on the USFed balance sheet
to captured American citizens, who command
pension funds totaling about $19.4 trillion
in the form of private funds (IRA, 401k,
Keough), defined contribution and defined
benefit plans (corporate), annuity reserves
(trusts), and government plans. A new special
USTBond will be fashioned, which will absorb
both USTreasurys and USAgency Mortgage Bonds.
The USCongress will eventually pass the
bill to authorize the seizure, amidst some
uncertain controversy. With the forced purchase
of USGovt securities from private retirement
funds, the USFed will have all the buyers
they need. Note that several other countries
have already taken this identical step.
See the Investment Company Institute database
(CLICK HERE). Even
the US Consumer Bureau is looking at the
retirement accounts. See the Bloomberg article
(CLICK HERE).
At least the captive US
citizens will be compelled to cover the
new debt racked up by the USGovt each year.
That would cover $1 trillion per year. Regard
it as inevitable, since the bill has been
tabled by the US Senate.

If the Jackass claimed to be an expert on Interest Rate Swaps, a lie would be
told. Some explanation can be given though.
First of all, they are not a contract entered
into by two parties in any official counter-party
setup. Take the simpler Credit Default Swap
as preface. As an investor, one might believe
in early 2008 that Lehman Brothers was a
cooked dead goose awaiting revelation. So
an insurance contract was purchased on its
10-year corporate bond against likely default.
It is like investing in IBM stock, as you
pay a price, and somewhere in the market
supplies the stock to you. You pay 22 (just
for argument, skip the unit denomination)
before the revelation of bankruptcy and
ruin. After September of that fateful year
when the US
banking sector died and was burned to a
crisp by the scorching mortgage fires, you
received 82 for the CDSwap contract upon
redemption. You bagged almost 300% in profit.
There was a counter-party for this derivative,
since an insurance contract was traded from
a previous owner. The party selling the
CDSwap at 22 missed an opportunity.

The Interest Rate Swap is a complex device that plays the spread of long-term
bonds versus the spread of short-term bills.
The spread involves a cash value against
a committed time to redemption on a bonded
security, like all spreads. They are ugly
complex, necessarily so in order to do what
they do and to keep the public unaware.
Remember that these derivatives are all
unregulated, and therefore have grown totally
wild like a weeded field given ample rain
and sunshine. Think of it this way. The
Boyz, principally JPMorgue here, use the
bottomless well of 0% money to fund the
IRSwap tables. With free money, they swap
the securities and convert them into purchases
of long-term USTBonds. No formal counter-party
exists, except that the JPMorgue desks sit
on both sides of the trade. The demand is
purely artificial, and no seller was involved
except the newly printed certificate in
electronic form that floods the bond market.
Since JPM fed the IRSwap engines so fully,
no chance exists of rising rates from the
0% bound. Doing so would implode the
IRSwap derivatives in a matter of days.
Regard JPM as short $trillions in 0% USTBills
of mere months maturity. Think leverage
of between 30:1 and 100:1. The ZIRP policy
will remain fixed near 0% forever and a
day. The derivative machinery assures it.

In the second half of 2010, the assigned Wall Street agent Morgan Stanley bought
$8 trillion of these Interest Rate Swaps.
That is when the big USTBond rally supposedly
happened, all very much fabricated to produce
what seemed like a wondrous phony flight
to safety. Borrow short, invest long, exactly
like the big US-Banks are doing with the
USFed carry trade on the USTreasurys since
QE programs began. Except in the IRSwap
case, they put it through the derivative
machine, with a conversion to USTBond demand.
Most of the Western world remains duped.
Not the Jackass, thanks to Rob Kirby and
his clear lessons on the congame.

◄$$$ THE USFED AS TOXIC PAPER GARBAGE COLLECTOR HIT $3 TRILLION IN THEIR
BALANCE SHEET. WITH TOXIC PAPER, MORE IS
NOT BETTER. THE UNCHARTED TERRITORY FOR
THE CENTRAL BANK IS NEVER NEVER LAND. GIVEN
THE SYSTEMIC FAILURE UNDERWAY AND INTERMINABLE
RECESSION, THEIR BALANCE SHEET WILL GROW
IN SIZE WITHOUT END. $$$

The USFed has formally promised to keep the current bond purchase program and
the zero bound rate in place until the USEconomy
responds favorably, most important the labor
market recovers. It will never recover,
since QE & ZIRP assure steady economic
deterioration from capital destruction.
The economist crew fail to comprehend this
basic fact of economics and capitalism.
The USFed is purchasing $85 billion of securities
every month, using the full force of its
balance sheet to undermine the USEconomy.
The central bank began $40 billion in monthly
purchases of mortgage backed bonds in September
under QE3, then added $45 billion in USTreasury
Bonds to that pace in recent months under
QE4. Resident apologist Julia Coronado is
a former USFed economist, and chief economist
at BNP Paribas. She offered a bland view
lacking any substance in reflection of her
lofty salary. She said, "We are
in uncharted territory. As the easy money
will flow through financial markets and
into the real economy at some point and
lift us to a better growth trajectory, [the
nation faces] a lot of risks."
Dream on with growth, since QE & ZIRP
ensure rising costs, which lock in falling
profits, followed by job cuts, shut business
segments, and retired equipment.

In late January a milestone was reached, a frequent occurrence. The total USFed
balance sheet climbed to $3.01 trillion
as of January 23rd. The lunatics at the
central bank have expressed concern over
overheating financial markets, when they
should concerned about destroying all financial
markets. The extremes have been touched,
with a 22% official rate by Chairman Volcker
in 1980, and recently a stuck 0% by Chairman
Bernanke in the last couple years. Witness
the zero bound, stuck in place. The USFed
cannot raise rates, period! They focus on
the labor mandate. They wish to reduce the
ranks of the nation's 12.2 million unemployed
workers. Their $85 billion monthly pace
of toxic bond purchases will continue until
the labor market improves substantially,
thus forever. They disagree on how long
that will be. Try forever, or until the
systemic failure occurs under their watch.
The Federal Open Market Committee at the
December 11-12 meeting showed members evenly
divided on ending official bond purchases
by mid-2013. One must wonder who they would
expect to purchase the worthless bonds.
The answer is nobody. They might someday
soon realize the QE to Infinity they have
embarked upon. Maybe not. See the Bloomberg
article (CLICK HERE).

◄$$$ A HUGE AMOUNT OF MONEY WAS WITHDRAWN FROM THE BIG-US BANKS IN THE
FIRST WEEK OF JANUARY. THE REMOVAL TOTALED
$114 BILLION FROM COMMERCIAL BANKS. THE
END OF THE T.A.G. PROGRAM TO SUPPORT MID-SIZED
BANKS SEEMS NOT TO BE THE EXPLANATION. $$$

More than $114 billion exited the biggest US
banks in the first week of January reporting,
and analysts are perplexed to explain it.
It was the largest single week withdrawal
since the September 11th of 2001. The most
rational explanation offered is the expiration
of the Transaction Account Guarantee (TAG)
program, the extraordinary federal effort
to shore up the mid-sized banks during the
2008 financial crisis. Smaller banks were
vulnerable to runs, thus protected by TAG.
The program backstopped their deposit bases
by temporarily offering unlimited insurance
on money kept in non-interest bearing accounts.
That guarantee ended on December 31st. Thus
the removal.

The TAG explanation does not hold. The USFed data shows
$114 billion leaving the 25 biggest banks,
equal to roughly 2% of their deposit base. Only $26.9 billion left all the other banks including the midsized, equivalent
to 0.9% of their deposit base. Over four
times as much money left the supposedly
unaffected bigger banks. A grand shift is
taking place for funds to find money market
funds or elsewhere. Some like Paul Miller,
a bank analyst with FBR Capital Markets,
caution that the USFed weekly data is a
noisy database. He claims the first quarter
is always a whacky quarter. With the federal
fiscal cliff drama, many companies shifted
dividends, while other bank clients guessed
on tax liabilities. At the same time, the
payroll tax just went up, pushing on most
wage earners a 2% hit. Some individuals
might simply shun the federally guaranteed
accounts and enter into investments like
money markets or mutual funds, which saw
their second highest inflows on record in
the first week of the year. The public always
chases the end of a low quality stock rally,
like dumb sheep. See the Business Week article
(CLICK HERE)
and the RT News article (CLICK HERE).

##
CURRENCY WAR BOILS

◄$$$ THE US-DX INDEX SHOWS AN OMINOUS BEARISH REVERSAL SIGNAL THAT HAS
BUILT UP OVER A THREE-YEAR TIMESPAN. THE
STANDARD USDOLLAR INDEX SHOWS A LONG-TERM
RECOGNIZED BEAR PATTERN AND A SIMILAR (BUT
LESS RELIABLE) INTERMEDIATE BEARISH PATTERN.
HOWEVER, THE COMPETIVE CURRENCY DEVALUATIONS
BY MOST MAJOR CENTRAL BANKS WILL KEEP THE
USDOLLAR LEVITATED. IT WILL SHOW APPARENT
CALM, DURING A MAELSTROM UNDER THE SURFACE.
$$$

The long-term chart shows large Head & Shoulders bear pattern. The world
wants to discard the USDollar for fiscal
deficits, punishment for endless war, and
horrific hyper monetary inflation by the
USFed central bank. But the world cannot
let the DX index crash, since each nation
strives not to accept and endure a higher
currency. Too much internal damage would
be done economically. So the US-DX index
will be levitated until the time comes when
it is isolated completely, then rejected
and snuffed out like a diseased rat trapped
in the corner which has rendered deep damage
from its filthy style for decades. Each
nation watches in terror as the USFed directs
the bond monetization with fresh toxic money,
a process that raises the cost structure
in the entire global economy. Nations have
no choice except to sustain the crippled
USDollar, so that their banking reserves
do not degrade further, and their economies
do not lose a competitive edge on their
export industries. Alternatives are
being sought to replace the USDollar, but
only when a new structure is in place, the
firewalls are in place, and the procedure
for the players are in place. Expect the
right side shoulder to extend and defend
the 79 level, which is of paramount importance.
All hell breaks loose if that level breaks
down, as weakened banking systems will threaten
to topple.

The intermediate chart shows a minor Head & Shoulders bear pattern, which
is overwhelmed by active management in defensive
action. Look for the recent downward correction
in the Euro to lift the US DX index a little
more, and possibly push it into the narrow
band between 80.5 and 81.3 as seen in the
daily chart below. The Euro had risen
unduly in the last few months, helped along
but a cool $237 billion in funny money European
bank aid since January, courtesy of the
USFed and its handy swap facility opened
to European banks. That the Euro is
rising at all during its crippled degeneration
is laughable. Such is the nature of the
managed currency arena. All the nations
that push down their currencies in defense
of their economies will see a strong buoy
effect to lift the USDollar. It is actively
managed. The USDollar index is dominated
in absurd fashion by the Euro, thus the
label anti-Euro index in some FOREX corners.

Notice how important the DXY = 79 support line is, in both the long-term and
intermediate charts. It has been defended
for 18 months. Keep in mind that for
the US DX to break down badly, the Euro must rise
with vigorous moves. Yet it is crippled.
Expect the DX index to pay a visit in the
next higher narrow band, but only for a
short while. Too much profit for veteran
traders lies in exploiting the potential
for corrections after central banks moved
their currencies by strong arm approaches.
The action in Europe
is turning into a tragic comedy. They want
a higher Euro currency in order to defend
broken banks and their balance sheets. But
the Japanese and Swiss, maybe even the British,
urgently work to keep their currencies down.
The battle is high pitched.

◄$$$ THE CHALLENGE TO MAINTAIN THE SWISS FRANC--EURO PEG WAS GIVEN A GIANT
ASSIST BY THE USFED DOLLAR FACILITY. SO
THE SWISS BANKERS HAVE ENJOYED AN OPPORTUNITY
TO DUMP EUROS ON THE DESPERATE EUROPEAN
BANKS, EAGER TO LIFT THEIR ROTTEN BALANCE
SHEETS. EVERYBODY WINS, BUT THE SYSTEM LOSES.
$$$

The crisis to maintain the Swiss Franc peg to the Euro currency has been averted.
But behind the marbled offices in Zurich
is desperation as their diversifed reserves
were shifted in favor of the Japanese Yen
and British Pound. In the last few months,
each currency fell hard, the Yen much more
drastically (by design). To be sure,
the big European banks desired the Euro
lift, since they are on the edge of ruin.
It should also be cited that the recent
engineered lift in the Euro was to benefit
the powerful influential Swiss bankers,
who still shout orders from their castles.
The $237 billion in easy USDollars was a
huge factor, a huge open channel, which
received almost zero press attention. Some
big interests are at work, to lift the Euro.
But it has gone too far, given the rotten
fundamentals in the EuroZone economy and
the more rotten balance sheets for the big
European banks. Witness the convulsions
of the fiat paper currencies, with the Euro,
the Swiss Franc, the British Pound, and
the Japanese Yen at the unstable periphery.
They orbit around the toxic ruined USDollar,
the Lord of the Flies.

◄$$$ THE CURRENCY WAR IS COMING INTO MAINSTREAM VIEW. THE COMPREHENSION
BY COLUMNISTS IS SHALLOW SO FAR, THE BREADTH
OF VIEW NARROW STILL. $$$

The mainstream economic and financial news lines have begun to describe a currency
war, but the columnists lack much comprehension
yet. They see only small porckets of the
extremely wide battleground. Most US-based
economists focus on USDollar strength, with
little awareness of all the various major
currencies jockeying for position. Although
Kyle Bass puts the currency war on the table,
he totally misses the destructive interplay
between central banks. He made a loose single
comment about exchange rates in movement
without much awareness that central banks
are desperately making policy decisions
to push down their currencies in competitive
devaluations in order to preserve their
export industries. He seems to indicate
that currency moves are passive outcoms
and indirect effects. He did not mention
the most important cross rate battles on
the planet. The Swiss-Euro 120 peg has been
in force for six months, recently damaged
by Japan and its submerged Yen.
He makes many general comments about Japanese
demographics, post-tsunami changes, their
failure to react in 20 years, takeover of
the Bank of Japan by politicians, and the
friction with China to affect trade. He actually expects the
Dollar-Yen rate to rise to 200 as the Japanese
debt takes a huge toll against the recession
backdrop. That would mean the Yen priced
at 50 cents, far lower than its current
107 value, over a 50% decline.

Bass puts too much focus on the bilateral cooperation between US and Japan
on central bank actions. In doing so, he
misses much of the rest of the world. Cite
some. The South Koreans are considering
strong currency actions. The Scandinavian
nations are also struggling to manage their
economies by using their currencies, frustrated
at the punishment for successful fiscal
balance. The Swiss and Japanese might have
to meet, and if they do, look for two possible
new nations to join forces with the non-USD
trade settlement system. They each have
motive to depart from a US$-centric
financial system. The fiat floating garbage
currencies are killing all the players,
some faster than others. See the Money News
article (CLICK HERE).

◄$$$ JAPAN HAS RECORDED CONSECUTIVE
CURRENT ACCOUNT DEFICITS, THE LATEST IN
DECEMBER. THEIR LEADERS ARE DESPERATE TO
TAKE DRASTIC ACTION. GIVEN THAT THE NATION
HAS BEEN STUCK AT THE ZERO BOUND FOR 20
YEARS, THEIR ONLY LEEWAY IS WITH THE YEN
CURRENCY. IMPORTS ARE UP FROM CHINA.
ELECTRICAL POWER GENERATION IS DOWN FROM
THE NATURAL DISASTER. JAPAN STRUGGLES.
$$$

Japan has the third largest world economy.
Japan posted monthly Current Account deficits
in back-to-back months for the first time
since 1981, indicating policy failure and
systemic strangle. The CA deficit equals
the trade gap adjusted for investments,
like stocks, bonds, property, patent royalty.
The CA deficit was JPY 264.1 billion
(=US$2.8 bn) in December. The proximal causes
were weakness in global demand, disputes
with China, and increased energy imports following
nuclear plant shutdowns. The hope is
for a revival for the export industries
in response to the powerful Yen exchange
rate decline, urged forcefully by the central
bank and government in coordinated policy.
The Yen move from 129 in September to 107
(a 17% decline) in February will spur exports,
suddenly made cheaper to foreign buyers.
The effect is expected in three to six months.
This is pure competitive currency devaluation,
a war. The recent embarrassment from the
deficits emboldens the Abe campaign to continue
with vigor, pushing the Yen lower still.

The last consecutive monthly Current Account deficit took place in February
1981. The trend has been down. The 2012
annual current surplus of JPY 4.7 trillion
was the smallest since 1985, after falling
51% from 2011. A detail, the Chinese exports
to Japan rose by 25% in January from a year earlier,
according to data from Beijing.
The Hat Trick Letter had reported a trend
over the last few years to ship some industry
to China for cost reduction, but the earthquake
and tsunami in February 2011 added pain
to the outsourcing initiatives. The Japanese
Economy is caught in recession, having shrunk
in Q2 and Q3 of 2012. See the Bloomberg
article (CLICK HERE).

◄$$$ THE BANK OF ENGLAND WILL BECOME THE FIRST G-7 NATION TO ENTER
A SWAP LINE AGREEMENT WITH CHINA ON YUAN CONVERSION. THE CURRENCY IS GRADUALLY
ENTERING INTO FULL CONVERTIBLE STATUS FROM
THE SWAP BACK DOOR. LONDON
STRIVES TO CONTINUE AS A GLOBAL FINANCIAL
CENTER. NOTICE THE NON-FOREX SOLUTION. $$$

The central bank for the United Kingdom is prepared
to set up a Chinese Yuan swap line. This
is very very big news, since England
will be the first G-7 nation to cooperate
in Chinese currency provision. The door
is opening in yet another substantial step
in moves to liberalize the Yuan currency
into broader usage, if not convertibility.
Chris Salmon is the Executive Director for
Banking Services at the Bank of England
(BOE). He told a meeting of senior bankers
in London that the move
was aimed at underpinning a developing offshore
market in Yuan trade out of London.
Add England to the long and growing list of nations
making bilateral currency agreements with
China. The list includes Brazil, Australia,
Russia,
Japan, South Korea,
Belarus,
Malaysia, and Indonesia. That the Yuan is not freely exchangeable
has been a deterrent for British officials.
The BOE actively wishes to see a more flourishing
Yuan business in London. Salmon said, "The Bank would welcome the development
of the offshore RMB market just as it would
any other legitimate market innovation,
and we would not want to inhibit that outcome
inadvertently through gaps in our operational
framework. To remove any residual uncertainty
about our attitude, the Bank is ready in
principle to agree a swap line with the
PBOC (Peoples Bank of China), assuming a mutually
agreeable format can be identified. Ultimately,
the growth of the market will depend on
the success of market participants in matching
incipient demand and supply for RMB denominated
products, just as the original EuroDollar
market grew by satisfying a latent private
sector demand for dollar assets in this
time zone. There is a perception that market
confidence would be boosted if the Bank
and the PBOC agreed a swap line."

European and US officials have been pressuring China for years to take more
action to open up the Yuan to market forces.
The Beijing officials respond privately to stressing
their unwillingness to subject their Yuan
currency to the deep banker corruption in
the West, with hidden devices and devious
mechanisms scattered under the financial
market tables. Thus the circumventing tactics
by Beijing
with barter deals based in currency swaps.
The Western financial markets constitute
a recognized gigantic trap for China, which they refuse to fall into.These
are standard tools used by the West to control
money and its flow, tilting the tables.
See the Exchange Stabilization Fund and
JPMorgan's derivative room, for instance.
Complaints are tiresome about the Yuan bearing
an artificially low valuation. The absurd
USTBond bubbly values should be examined
first. Despite the desire to keep tight
reins, observe the internationalization
of the RMB (renminbi = people's money),
their initiative to introduce their Yuan
currency globally. They are setting up currency
swap lines around the world, in ways that
Western analysts do not comprehend. The
swap lines create a foundation for non-USDollar
trade, in essence barter that revolts against
the USDollar itself as the trade standard
by side stepping it.

Britain has always been eager to reinforce London's
status as Europe's biggest financial center. The City launched a currency and
bond market for Yuan usage last year. The
swap deal nails down the London
center for the Chinese. One should be
amazed that the New York clown criminals are not interested. Thus the US
will isolate itself in preparation for Third
World entry. For Chinese Govt Bond trading
to indeed flourish, the Yuan currency must
be made more accessible for trade. The swap
deal does that specifically, although not
in the manner preferred by the US
& UK
bankers. They bent to the will of Bejing
leaders, who prefer no FOREX solution.

Issuance of Yuan-based bonds listed in London
has been limited to a handful of firms,
such as oil major British Petroleum, along
with banks HSBC (British-Hong Kong) and
ANZ (Australia-New Zealand). By comparison,
the Hong Kong market
for Yuan-based bond grew to around CNY 350
billion (=US$55.7 bn) since 2010, according
to Thomson Reuters. Early indications are
promising for London. The data from global transaction services organization SWIFT
shows the UK
is the leading center for offshore Yuan
trade outside Asia.
It has made far more progress in inducing
companies to invoice in Yuan currency, rather
than the USDollar. The main competition
for London in Chinese
financial trade is Hong
Kong. See the Reuters article (CLICK HERE).
The irony is growing thicker, as London
discourages USDollar transactions in their
London processing.

◄$$$ A BIG MARKET SQUEEZE IS COMING. A PRINCIPAL FACTOR WILL BE FROM A
GOLD-BACKED CHINESE YUAN CURRENCY. THE STORY
MUST BE CONFIRMED TO A GREATER DEGREE, SINCE
SO IMPORTANT AND HIGHLY DISRUPTIVE. SEVERAL
ROADWAYS ARE LEADING TOWARD A GOLD MARKET
STAMPEDE. $$$

As preface, keep in mind that the World Gold Council is hardly a friend of gold,
as strange as that sounds. They have too
many ties to the establishment, eager to
pump out reports on false official gold
reserves, eager to promote the nonsensical
jewelry arguments against a rising price
effect, eager to cite the corrupted COMEX
gold price itself. Aside from the tainted
reputation, the council hasconfirmed
the Chinese intend to back the Yuan currency
with Gold bullion held in reserve. Introduce
Keith Barron, who was co-founder of Aurelian
Resources when they made a 13.7 million
ounce gold discovery in 2006. Aurelian was
later acquired by Kinross Gold in 2008.
Before King World News, Barron expressed
his opinion that the world will see a powerful
short squeeze in gold. The Germans have
given notice to the United
States for repatriation
of their gold on account. As the return
starts to look difficult, expect the Germans
to accelerate the process with more hostile
demands. This will simply add fuel to the
massive squeeze which lies in front of us,
as a feeding frenzy in the gold market could
easily occur. He expects the Gold &
Silver bulls will begin to trample the bears
soon. He cited other important factors.
Dealers in the US have informed him that immediately after the
Presidential Inauguration, the sale of monster
boxes of US silver eagles went crazy, exploding
in volume. Business is crazed right now,
with strains to maintain inventory, which
sells quickly. The public smells a financial
breakdown.

Barron cited the hedge fund Pacific Group, which is converting one third of
its assets into physical gold. The Hat Trick
Letter reported on this story in the last
month. They have already taken delivery
of $35 million worth of gold bars. William
Kaye of Pacific Group said, "In
our judgment we are in the early stages
of what would likely be the world's largest
short squeeze in any instrument. This goes
back to what we were talking about the last
time I was interviewed on KWN regarding
gold repatriation back to Germany. If several key nations
claim their gold at the same time, the world
will witness an incredible short squeeze."

Barron went on to cite a recently submitted document by the World Gold Council.
It stated that the Chinese are going
to back their currency with Gold. Doing
so would displace the USDollar and make
the Chinese Yuan the world's reserve currency.
No paper currency can compete with a solid
gold-backed currency, NEVER. The details
on convertibility to Gold is as yet very
unclear. The Chinese are sitting on mountains
of USDollars. They have spent the last several
years purchasing resource and mineral assets
around the world, like in Brazil,
Iran,
Saudi Arabia, and Africa,
using their less than desirable USTBonds
in the large transactions. The reality is
that all of the fiat currencies are in a
race to the bottom, caught in the frenzy
of accelerating currency war. Barron cited
the Bank of Japan, which will yet again
expand the QE bond purchase, push down the
Yen currency, and print vast sums of money.
Tokyo
is a wreck. The move by the Japanese is
very bullish for Gold, in his opinion. Barron
concluded, "Between what is happening
with the setup for the coming short squeeze
in Gold, coupled with the Chinese moving
to back the Yuan with Gold, and the shortages
we are seeing in the Silver market, the
outlook for Gold & Silver going forward
is spectacular. Quite frankly, the Gold
& Silver bulls are going to begin to
trample the bears at some point in the near
future." See the King World News
article (CLICK HERE).

◄$$$ THE RUSSIANS ARE DIVULGING A GERMAN DEPARTURE FROM THE COMMON EURO
AS CONCEIVABLE. EX-HEAD OF THEIR CENTRAL
BANK, KUDRIN IS AN EXPERIENCED WARRIOR.
HE BELIEVES THE GERMANS ARE UNDER GREAT
STRAIN IN FUNDING COSTS FOR EUROPE, WITH
POLICY DECISIONS COMING FROM BRUSSELS.
$$$

Der Spiegel gave an interview with Alexei Kudrin, the former Russian Minister
of Finance from 2000 to 2011. He has extensive
experience and high credibility, having
also been involved in the Dawson Creek conference in August 2005 hosted by
GATA. The Russians at that time learned
how their gold loans to London
were used to suppress the gold price. The
Russian central bank halted all leasing
activity from that point onward. Kudrin
discussed the issue of Germany leaving the
Euro Monetary Union, soon to abandon common
Euro currency usage. Given that Kudrin is
extremely close to Vladimir Putin, such
a statement could have never been made without
consent of both Berlin
and Moscow.
Furthermore, Kudrin is seen as having good
chances to succeed Dmitry Medvedev as Russian
prime minister. The floating toxic currencies
are gradually to be permitted to crash and
burn.

Alexei Kudrin

In the Spiegel interview, Alexei Kudrin spoke on diverse topics. His points
are related here almost verbatim, but edited
to fit in prose format. He claimed that
Russian economic reform came to a standstill
in the last year, and political reforms
did not produce the results hoped for.
He regarded as a positive trend the new
active civil society has developed. They
protested parliamentary elections not being
conducted fairly. The public wants fundamental
reforms. The nation must develop new parties
and pass laws to prevent election fraud.
Candidates should have equal access to the
media, and business owners who fund opposition
parties should no longer be punished for
the influence. Russia has to take a chance with more democracy.
He considers Putin open-minded to stated
positions and above all pragmatic. He mentioned
how he joined protests demanding democratic
reforms and new leaders with sound judgment,
which drew between 50,000 and 70,000 people
mobilized by attorney Alexey Navalny or
former Deputy Prime Minister Boris Nemtsov.
He hopes for gradual change in a realistic
manner. He discussed the widespread xenophobia
and the imperial syndrome, where a significant
number of Russians place their country above
other nations and see neighboring countries
as part of their zone of influence if not
control.

Kudrin does not offer support for rising military budgets, a point of conflict
with past leadership, in particular Medvedev.
He regards the arms race as a main reason
behind the demise of the Soviet
Union, a wise viewpoint. He could not
justify the production of tanks and fighter
jets at a time when people were standing
in line for food with their ration cards.
On the energy front, he believes any oil
price decline would quickly result in a
reduction in FOREX reserves held by Russia,
which stand as third largest in the world.
Then either taxes would have to be increased
or military and social spending cut. On
economic reforms, he endorses several projects
like increasing the retirement age (now
60 for men and 55 for women). He urges more
investment in infrastructure, such as roads,
housing, power grids, and water lines. He
wants more privatization and fewer government
owned companies, urges a capitalism movement,
and favors more local power and tax revenues
for the regions. He admitted a corruption
problem in Russia, alluding to the defense
minister who was dismissed for financial
irregularities. He believes policeman, teachers,
doctors, even bank managers issuing loans,
are all open to bribery. He advocates stricter
government spending controls, in response
to fraud which has risen in proportion to
official funding outlays.

On the European Union bailout for Cyprus valued at EUR 17.5
billion (=US$23.3 bn), he believes the effect
to benefit Russian oligarchs is exaggerated.
He believes such criticism distracts from
the fact that Cyprus
has been a convenient tax haven for companies
from the West for a long time. The Western
company usage of offshore models around
the world is just as likely as Russian usage
in Cyprus.
He finally turned his viewpoint to Europe
more directly. He wants the EuroZone to
come to grips with its problems. To date,
it is not doing enough to achieve that end.
Spain
is in a serious trouble, which along with
Greece are effectively bankrupt. They cannot service
their debts on their own. By purchasing
sovereign bonds from these two nations,
the Euro Central Bank helps them by merely
buying time, which is not a solution. The
situation will grow worse, since debt loads
are not being reduced by policy actions.
The European Union must proceed more decisively
to reduce debt loads. Some debt might be
written down in his opinion, if provisions
are made to cushion the effect on creditor
banks. It would constitute a step away from
the precipice and toward stabilization of
the markets.

The Euro currency was raised as a topic. Kudrin admitted he was very enthusiastic
at the time of its introduction. However,
today it is obvious how everything was not
well planned. The rules to prevent debt
limit violations were not enforced strictly
enough. Productivity is too low in some
countries, like in the South. He accepts
the possibility that the EuroZone will fall
apart. The financial and economic crisis
can quickly turn into a political crisis.
He described a potential shock for people
in the West to drastically reduce their
standard of living, as the Europeans are
living beyond their means in his opinion.
He called the social welfare state unsustainable
in its current form. As for Germany, he estimates the European crisis costs
Germany EUR 100 billion per year. The inherent
strain would be incredible if the figure
rose by 50%. To save the Euro currency,
he believes a stronger fiscal union is required,
as per government deficits and spending
controls. He pointed to the conflict with
Brussels
of decisions on government spending and
taxes, where Germans simply would not permit
the detached commissioners to dictate policy.
Kudrin directly agreed that a German
withdrawal from the EuroZone is conceivable,
since every solution will be expensive for
Germany.
He does not believe Germany
has yet faced difficult political decisions
directly tied to the Euro preservation or
departure. See the Spiegel article (CLICK
HERE)

◄$$$ VENEZUELA DEVALUED THEIR BOLIVAR
CURRENCY, BUT NOT ENOUGH TO MATCH THE BLACK
MARKET EXCHANGE RATE. EXPECT ANOTHER DEVALUATION
SOON, SINCE THE BANKS WANT THE BUSINESS.
THE MOVE SHOULD ADDRESS THE ABSURD SHORTAGES
IN THEIR ECONOMY, SUCH AS FOOD IN SUPERMARKETS.
BUT MUCH HIGHER PRICES WILL COME AS A RESULT.
EXPECT ANOTHER DEVALUATION, SINCE A GAP
CONTINUES VERSUS USDOLLARS OFFERED ON THE
BLACK MARKET. $$$

The Venezuelan Govt devalued its Bolivar currency to 6.3 per US$ from 4.3 per
US$ in early February. They actually hope
to shore up government finances after reckless
spending last year. It will not happen,
but rather price inflation will be stoked
instead. The outcome will be more available
USDollars to bankers that to date has hindered
imports and left many supermarkets barren
of basic supplies such as flour or sugar.
The big smash effect will be the higher
consumer prices in the import dependent
nation. It already has one of Latin
America's highest inflation rates. Venezuela
has stupidly and stubbornly maintained exchange
controls on the Bolivar currency for a decade.
Thus the adjustment will occur in large
disruptive steps. They have forced importers
and travelers to obtain USDollars through
a state currency board, or else to buy them
on an illegal black market where greenbacks
fetched nearly four times the official rate.
The currency exchange system known as SITME
was also eliminated, a clumsy bond swap
facility linked to the state currency control
board. The powerful shock of price inflation
should undermine the popularity of the clown
criminal who occupies the president post,
Hugo Chavez. He struggles with cancer and
might not be able to complete his new term
in office. He and his cohorts have robbed
the state firms (PDVSA oil cash cow) blind
for over a decade. Food issues usually break
popularity and lead people to street protests.
Consumer prices rose 3.3% in the single
month of January, their second highest rate
since 2010, while product shortages were
the most severe in five years. See the
Reuters article (CLICK HERE)
and the Al Jazeera article (CLICK HERE).

USDollars on the illegal black market had for weeks been fetching nearly four
times the official exchange, which economists
cited as a key sign an exchange rate adjustment
was imminent. Businesses frequently have
to tap this market because they are unable
to acquire US$ funds from the official Caracas
offices. Despite a 32% official devaluation,
the black market reflected an almost 75%
discount before the devaluation occurred.
The official move just announced was not
enough. Expect another official devaluation
soon as the new official rate must go lower.
It is amazing that the black market is often
a true market. Thanks to Craig McC of San
Francisco for astute contributions.